This commentary was originally posted in Forbes on June 21, 2015. 

There are four “majority-minority” states in the U.S.: California, Hawaii, New Mexico and Texas. The well-being of minorities in these states, as well as of the soon-to-be plurality of white, non-Hispanics, is instructive for policy makers. Of these four demographic versions of America’s future, it’s only in Texas where all four of the largest racial or ethnic groups have below average Supplemental Poverty rates .

In December of last year, the Brookings Institution released a report projecting 2044 as the year America would become a “majority-minority” nation, with white, non-Hispanics dipping to 49.7 percent of the population.

America’s ongoing diversification has profound policy implications, from reducing poverty to education to having an opportunity to live the American Dream.

With that in mind, how well do Americans fare in the four majority-minority states?

The poverty rate is one basic measure of wellness. But, the U.S. Census Bureau’s Official Poverty Measure has been criticized as being far from comprehensive. The 50+ year-old Official Poverty Measure uses a formula that sets the poverty level at three times the cost of a basic diet, including cash assistance, such as Social Security, Temporary Assistance to Needy Families, and the Earned Income Tax Credit. Under this measure of poverty 9.7 percent of non-Hispanic whites were poor in 2013 vs. 10.5 percent of Asians, 23.7 percent of Hispanics, and 27.3 percent of non-Hispanic blacks. Among the native born, 14.1 percent were poor vs. 18.1 percent of foreign born residents of the U.S.

But, the Official Poverty Measure has a few significant shortcomings: it doesn’t account for regional cost of living differences (poverty thresholds are the same in the 48-contiguous states); it doesn’t account for in-kind assistance to the poor, such as housing vouchers and food stamps (Supplemental Nutrition Assistance Program); and it doesn’t account for taxes and employment-related costs.

The Census Bureau’s new Supplemental Poverty Measure makes up for these shortcomings, with one significant critique being that it sets the poverty foundation at the 33rd percentile of what Americans spend on “food, clothing, shelter, and utilities (FCSU), and a small additional amount to allow for other needs…” Using a relative threshold of wellbeing, rather than an absolute measure, assures that America will likely always have a large percentage of poor. This is because only the most universal and aggressive of redistributionist government schemes could ever see relative poverty significantly reduced vs. the current poverty measure’s absolute formula of three times the cost of a basic diet. Even so, the Supplemental Poverty Measure is useful because it accounts for state-to-state variances in the cost of housing.

In 2013, the Supplemental Poverty Measure calculated white, non-Hispanic poverty at 10.7 percent, Asian poverty at 16.4 percent, black, non-Hispanic poverty at 24.7 percent, and Hispanic poverty at 26 percent. Poverty rates among the native born were estimated at 14.3 percent while 23.8 percent of foreign born were estimated to be poor. Poverty rates for the foreign born and Hispanic and Asian minorities were significantly higher under the Supplemental Poverty Measure vs. the Official Poverty Measure, because the former accounts for some government benefits that many foreign-born residents are ineligible to receive. Further, Hispanic and Asian minorities tend to be concentrated in higher cost of living states than is the case with America’s African-American residents, pushing their true poverty rates even higher.

Official Poverty Measure Rate, 2013 Supplemental Poverty Measure Rate, 2013
White, non-Hispanic 9.7% 10.7%
Black, non-Hispanic 27.3% 24.7%
Asian 10.5% 16.4%
Hispanic 23.7% 26.0%
Native born 14.1% 14.3%
Foreign born 18.1% 23.8%

So, how do people fare in the four majority-minority states per “The Supplemental Poverty Measure: 2013”? Three of the four states show poverty levels above the national average, with only Texas coming in at the national average. Both Hawaii and California see huge increases in their poverty rates, once the extremely high cost of housing in those two states is considered, with Hawaii’s poverty rate increasing by 6 percent, a 48 percent relative increase, and California’s increasing by 7.4 percent, a 46 percent relative increase.

Official Poverty Measure Rate, 2011-2013 Supplemental Poverty Measure (SPM) Rate, 2011-2013
California 16.0% 23.4%
Hawaii 12.4% 18.4%
New Mexico 21.5% 16.0%
Texas 17.2% 15.9%
National Average 14.9% 15.9%

Of note here is that California has the nation’s highest Supplemental Poverty rate, higher even thanWashington, D.C. Proportionately, California has 47 percent more people in poverty than does Texas or the U.S.

Demographics, cost of living, unemployment, and government benefits all factor into the poverty level. The table below provides a demographic overview of the four majority-minority states as of 2013.

White, non-Hispanic Black, non-Hispanic Hispanic Asian Other
California 39.0% 6.6% 38.4% 14.1% 1.9%
Hawaii 23.0% 2.3% 9.8% 37.7% 27.2%
New Mexico 39.4% 2.5% 47.3% 1.6% 9.2%
Texas 44.0% 12.4% 38.4% 4.3% 0.9%
National Average 62.6% 13.2% 17.1% 5.3% 1.8%

Now, let’s examine the Supplemental Poverty Measure for each of the minority-majority states as averaged from 2010 to 2013 for the state as a whole and for each of the four largest racial or ethnic groups in the nation (an extra year was added to increase the sample size and thus, decrease the margin of error). This table shows that Texas has the lowest Supplemental Poverty Measure rates for two of the four groups listed: white, non-Hispanics and Asians while Hawaii has the lowest rate for Black, non-Hispanics and New Mexico has the lowest poverty rate for Hispanics. Further, Texas is the only majority-minority state where America’s four largest racial or ethnic groups all enjoy a Supplemental Poverty rate that’s below the national average.

All SPM Rate, 2010-13 White, non-Hispanic SPM Rate, 2010-13 Black, non-Hispanic SPM Rate, 2010-13 Hispanic SPM Rate, 2010-13 Asian SPM Rate, 2010-13
California 23.4% 14.8% 30.1% 33.7% 17.9%
Hawaii 17.4% 16.1% 17.9% 19.8% 14.7%
New Mexico 16.0% 11.1% 22.8% 18.6% 17.2%
Texas 16.4% 9.7% 19.9% 22.7% 14.1%
National Average 15.8% 10.8% 24.7% 27.7% 17.1%

Finally, just for comparative purposes, it would be instructive to see what the poverty rate would be in each of the four majority-minority states if each state had the same demographic make-up as the national average while maintaining the same state poverty rate for each group within the state. With this test, we see that, if Texas had the same demographic profile as the U.S. and each demographic group maintained the same Supplemental Poverty Rate, Texas’ poverty rate would be far below the national average. New Mexico would also have less poverty than the national average. Conversely, Hawaii would be above the national average while California would be significantly above the national average.

Notional SPM Rate if State’s Racial and Ethnic Composition Equaled the National Average  2010-13 Change from Actual SPM Rate
California 20.1% -3.3
Hawaii 16.7% -0.7
New Mexico 14.2% -1.8
Texas 13.5% -2.9
National Average 15.8% N/A

The poverty rate varies significantly in each state due to a range of measures, unemployment rates, wage levels, cost of living (for the Supplemental Poverty Measure), and demographics all play a role. A state’s policies and economic vitality is also an important driver of prosperity and poverty.

With America on a track to become a majority-minority nation by 2044, it’s useful to examine the four states that already are majority-minority to see how well their residents are doing and then examine those states for applicable lessons in governance. Doing so shows that, relative to the nation, America’s four largest racial and ethnic groups do better in Texas.

The Texas model of governance—low taxes, less regulation, and lawsuit reform—results in more prosperity and less poverty for all Americans than does the big government model pushed by the White House and epitomized by California.