Newsom’s California: Latest Evidence of a Death Spiral

SACRAMENTO — After Gov. Gavin Newsom signed Assembly Bill 1228, raising the minimum wage for fast-food workers and creating a council to regulate working conditions, the bill’s author issued a typical highfalutin statement. “We did not just raise the minimum wage to $20 an hour,” said Assemblyman Chris Holden (D-Pasadena). “We helped a father or mother feed their children, we helped a student put gas in their car, and helped a grandparent get their grandchild a birthday gift.”

Newsom noted that the state is home to 500,000 fast-food workers who seek better pay, but we’ll need to adjust that number downward a bit. After Christmas, Pizza Hut disclosed to the state’s Employment Development Department (you know, the same agency that paid out as much as $32 billion in fraudulent unemployment claims) that it was laying off all 1,200 of its stores’ delivery drivers.

That looks like fewer fathers or mothers who can feed their children or put our state’s overpriced gas in their car. That $4-an-hour wage boost sounds good on paper, but not it if means fewer jobs. Who couldn’t see this one coming? As I wrote in the Orange County Register in November: “The unions are claiming a victory for workers, but it’s not hard to guess the result. Higher prices will mean fewer customers and reduced profits. That means fewer restaurants and fewer jobs.”

Pizza Hut will let third-party delivery services, such as Grub Hub, handle deliveries, but this won’t be the last announcement of fast-food layoffs. In many cases, the jobs will simply dry up as individual franchises reduce shifts, curtail hiring, and shift to automatic kiosks as customers cut back on their restaurant outings. The law doesn’t target mom-and-pop restaurants, but they’ll face wage pressure as they compete for workers who can (theoretically) earn more at national chains.

None of this will stop Newsom from touting his record of helping low-wage workers. “We’re making it known that the health and wellbeing of workers and their families is of the utmost importance for California’s future,” the governor noted in October when he signed Senate Bill 616, which expands the number of paid sick days (from three to five) that California’s private employers must pay. It also imposes new reporting and regulatory requirements.

The California Chamber of Commerce is concerned that “far too many small employers simply cannot absorb this new cost, especially when viewed in context of all of California’s other leaves and paid benefits, and they will have to reduce jobs, cut wages, or raise consumer prices to deal with this mandate.” The group warns about the law’s impact on California’s “long-term competitiveness,” but few in the Capitol listen to mere employers.

As we ring in the New Year, consider some of the other new employment-related laws that will go into effect. The state now requires employers to provide five days off for “reproductive loss.” Landscape businesses (and consumers) must deal with a new law that bans the sale of gas-powered lawn equipment, which will increase costs and reduce reliability for lawn services. The state is offering subsidies to help businesses make the transition, but it’s just one more hassle — and one that will further strain our unreliable electricity grid. No single employment bill will obliterate the economy, of course, but business owners must constantly deal with the drip-drip-drip of one new regulation after another.

Lawmakers learned nothing from their Assembly Bill 5 debacle. It banned most forms of independent contracting but led to so much blowback (lost freelance jobs, etc.) that the Legislature exempted 100 industries from its provisions. Meanwhile, the state’s ability to ameliorate its self-imposed damage has lessened now that it’s facing a $68-billion deficit. Too bad Newsom and his allies largely squandered the $97.5 billion surplus we enjoyed 18 months ago.

The administration did what it likes to do — expand government bureaucracies and spending. The Orange County Register’s Teri Sforza recently looked at the budget and quoted Gov. Arnold Schwarzenegger’s adviser David Crane: “General Fund Expenditures Per Capita have climbed 63.9% since Governor Newsom took office, growing at more than twice the annual rate at which those expenditures grew under Governor Brown.” She found the number of state employees is rising even as the population is falling.

And yet our problems (crime, homelessness, housing shortages, etc.) keep expanding. One might conclude that government spending is rarely the answer, but that would be news to our state’s progressive legislative majority. Per the latest Census report, California’s population losses are continuing despite past assurances from our leaders that this was just a COVID-caused aberration. This is a beautiful state, but I can’t blame people for voting with their feet. At least they can warn their new neighbors not to follow in our footsteps.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

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