January 5, 2024 - 11:30am
Since Gavin Newsom took office as Governor of California in 2019, the condition of the state’s working class has steadily deteriorated. From the rising cost of living to increased tax bills from the beginning of this month, Newsom’s purportedly “progressive” policies have actually undermined the interests of workers and impeded the upward mobility of Californian citizens.
For example, shortly after Christmas Pizza Hut announced the termination of over 1,200 delivery drivers in the state. The decision coincided with the upcoming increase in California’s minimum wage, which is set to rise from $16 to $20 per hour for fast-food workers, impacting an estimated 500,000 workers. Other major fast-food companies have threatened to follow suit, with McDonald’s and Chipotle cautioning about potential repercussions such as higher prices and closures.
Despite these policies being introduced to assist lower-wage employees, Newsom fails to understand that, really, they have the reverse effect. As wages rise, so do costs. And if labour costs rise too quickly, companies may end up switching to automation, resulting in further closures. For instance, self-checkout machines have already replaced cashiers at many grocery stores. And just this week, the world’s first fully AI-powered burger restaurant opened in Pasadena.
Recent data from the Bureau of Labor Statistics indicates that California currently holds the third-highest unemployment rate in the United States at 4.9%, but this new law could push the figure even higher. The state also holds the unfortunate distinction of leading the nation in poverty, surpassing all other states with a rate of 13.2% — more than a third higher than the national average. And even when adjusted for cost of living, California still boasts America’s highest poverty rate, due to its exceptionally high costs of essentials such as housing, fuel, utilities, and other consumer necessities.
Proponents of a higher wage floor stress the need to help lift the poor, yet any positive gain on income for workers is quickly counteracted by the state’s rising costs of living, particularly in housing. California is home to seven of the 10 most expensive cities in America for renters. What’s more, electricity and gas in the state are higher than anywhere else in the US thanks in large part to Newsom’s green energy initiatives.
Originally marketed with the intent of “holding billion-dollar corporations accountable”, Assembly Bill 1228 (AB 1228) was signed into law by Newsom last September. Now, it is hurting franchise restaurants, the majority of which are actually small-scale enterprises operating with narrow profit margins. Minorities represent 30% of franchise owners in California, and this new law is anticipated to have a disproportionate impact on them, leading to potential layoffs and closures.
Elevated unemployment rates can precipitate adverse effects on the economy, including an increased demand for public assistance, a reduction in consumer spending, and diminished productivity, ultimately resulting in lower incomes. These factors pose a significant threat to California’s pursuit of a “workers’ paradise”, especially considering the state’s record budget deficit, which has now reached $68 billion due to unexpectedly low tax revenues in recent months.
Newsom’s failure to comprehend the inverse correlation between escalating wages and heightened costs presents a tangible threat to California’s economic sustainability. Despite its adverse impact on businesses, this situation serves as a significant political victory for both the Governor and the unions. This outcome allows him to champion his labour-related achievements on a national stage. In an election year, this could provide a crucial foundation for advancing his far-from-subtle political aspirations.
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SubscribeNewsom is happy to introduce the ugly dystopia of California to the rest of the US and no doubt would be happy to preside over the Hunger Games. The threat to democracy is far more likely to come from this slick and slippery operator than Trump.
This man is surely the devil in disguise.
The ultimate Batman villain.
The wife is even worse.
Gavin Newsom is exactly who and what many said he is. The man who first broke San Francisco and now California, is amazingly, being discussed as a possible fill-in for Joe Biden in the event of the DNC recognizing reality or the incumbent’s inevitable inability to be coherent any longer. Elections have met consequences, and it’s too bad, but the same people who voted for Newsom would do so again.
To be a leftist requires that you have an absolute inability to understand two fundamental concepts; opportunity cost and the law of unintended consequences.
If these people really wanted to increase the living standards of the poor, they’d invest massively in council/state housing.
High rents and house prices mean higher wages (or more government assistance and thus higher taxation) are required simply to allow people to afford the basics. This in turn makes doing business harder as prices have to rise in order to turn a profit, making these companies less competitive.
If the state/council had an abundance of housing for those workers who couldn’t afford to buy and set rent at 20% of household income, then wages wouldn’t need to be as high to cover living costs and businesses would have lower staffing costs. Not having to spend half your wages on a private rental would also mean people would have more money to spend on those businesses (creating jobs and economic growth) and less demand for private rentals would lead to many landlords selling up due to a lack of tenants and causing a drop in house prices meaning more could afford a basic family home.
As the article says constantly pushing up the minimum wage isn’t a long term solution, however keeping it stagnant while other costs rise simply means the taxpayer ends up subsidising poorly run companies by paying a proportion of their staffing costs so their employees aren’t homeless.
Great incisive analysis. The problem with too many avowed liberals is that they don’t understand basic economics; it’s all about making a grand display of virtuousness, which is more often than not used to mask another agenda entirely.
In addition to NIMBY-ism, which precludes building in suburban areas, there is the added roadblock of regulations, which means it takes 10 years to actually build anything in California.
Newsom and his well-monied backers fundamentally DON’T CARE about the people they claim to be trying to help. I doubt that he or any of his upper-crust SF backers ever darken the door of a fast food establishment, or a minority-owned franchise.
This is all about virtue signaling.
Yes. They aren’t concerned about an increase in the legal minimum because they pay their illegal domestic workers under the table.