California minimum wage boost made economy worse. Newsom can’t fix it
California was once the wonderland where dreams come true. From Disney and Hollywood to its lush landscape and powerful politics, it seemed like a utopia of diversity, forward-thinking ideas and the picture of economic health.
California’s per-capita income and gross domestic product were soaring thanks to a thriving agricultural industry, a booming tech sector and what was then lower unemployment rates. In 2022, the state had the fifth largest economy in the world, boasting a higher GDP than most developed countries.
More millionaires lived in California than ever before with data showing their number grew 66% from 2019 to 2021.
As California slowly adopted more progressive policies, even right-wing America had to nod to its thriving economy.
What went wrong with California’s economy?
But California’s booming economy has taken a hit lately, thanks to liberal policies that have taken root. Things like tax hikes, hefty regulations and policies were progressive but failed to produce positive outcomes. According to The Economist, “The state faces three overlapping challenges: rising unemployment, growing fiscal strains and population outflows.”
The California Center for Jobs and the Economy found that California’s economy may actually drop from fifth best in the world. The state’s GDP growth was 32nd in the nation last year thanks to revenue drops from rising unemployment, among other factors.
There are a few indicators of where the state’s economy is heading. The cost of high gas and housing prices are ushering in an affordability crisis. California now has the highest unemployment rate in the country. That’s more than a million unemployed workers.
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How do California economic policies compare with Texas?
As a comparison, we can look at how Texas, a Republican-run state, matches up with California. The Texas economy is second to California among U.S. states and eighth in the world.
Even when California’s economy was humming along, a 2021 Stanford University study comparing Texas and California’s economies points out stark differences between red and blue governing styles that foreshadowed California’s slow descent.
In California, state and local government revenues and spending were 60% higher than Texas on a per-resident basis. California has the country’s highest top marginal individual income tax rate, while Texas has no individual income tax (property taxes are higher in Texas though).
“State and local governments in California and Texas spent $638 billion and $291 billion, respectively, in the 2019 fiscal year, which represented $16,105 and $10,024 per resident,” the report reads.
California thinks a larger taxpayer-subsidized government is the answer to their residents’ problems; Texas wouldn’t presume that.
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California’s decision to boost minimum wage only made things worse
The California legislature added to the problems by passing a law that boosts minimum wage.
Starting April 1, fast-food restaurant employees must be paid at least $20 an hour. Sounds nice right? Kinda makes slingin’ burgers at McDonald’s look a bit more appealing, doesn’t it? Not so fast.
If an employer is required to boost wage earners’ take-home pay per hour by several dollars, that cash must come from somewhere. Businesses either need to cut other salaries, raise prices for customers to compete with the costs or – worst-case scenario – shut down.
Restaurants are already starting to feel the repercussions.
Industry experts have suggested that to offset the increased cost to their bottom line, some business owners may choose to replace workers with kiosks or other technological advances.
The new minimum wage law isn’t a boon for customers, either. Several fast-food chains in California have already indicated they’ll be forced to raise prices on menu items.
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The new minimum wage law in California will hurt small businesses, too.
Celebrity chef and host of “Restaurant: Impossible” Robert Irvine told Fox News Digital, “We’re going to lose about 20-plus percent of our small, mom-and-pop business because what California has actually done is going to enable other states to do the same thing. (It) has opened the gateways to other states to raise that minimum wage.”
Irvine is right: California is sometimes a precursor when it comes to social, political and economic policies. The rest of the country should reject this, full stop.
In fact, there’s evidence residents think life in their beloved Golden State is no longer sustainable. California residents are fleeing in droves, often to states with no income tax like Florida and Texas.
Voters have a chance to reject some of Newsom’s liberal policies
One November ballot initiative could stem the tide a little and begin to balance California’s economy. The Taxpayer Protection and Government Accountability Act would require voter approval for any new California taxes or tax increases and could therefore limit upcoming tax increases at state and local levels. The provision is designed to curb tax increases that often occur without oversight.
Of course, Newsom doesn’t favor the initiative, which is why Californians should.
Progressivism aside for a moment, Newsom shows promise as a Democratic presidential candidate. He’s charming and adept at steering the helm of a behemoth economy, and voters like him.
However, behind the charisma is a leader who has helped derail California – even its once untouchable economy – by implementing progressive policies that hurt residents.
Newsom is a case study in just how important ideology and policy are – socialist ideas in practice can, or should, hurt even the most promising politicians. If he’s serious, he’ll need to position himself toward the center more and start listening to voters when they tell him they want oversight when it comes to state and local taxes.
Decades of progressive policies helped California become a socialist utopia. It was only a matter of time before the economy reacted to tax hikes, hefty regulations and policies that sound progressive but fail to produce positive outcomes.
The minimum wage increase is just the latest example of why California’s economy is starting to struggle and America shouldn’t count on Newsom to fix it. Because even California liberals can spend their way out of a good economy and into one that’s highly taxed and heavily regulated, that boasts the highest unemployment rate in the country and is increasingly unaffordable.
Nicole Russell is an opinion columnist for USA TODAY. She lives in Texas with her four kids.
