Gavin Newsom dishes out financial pain as prices skyrocket after his latest policy takes effect

Democrats’ legislative supermajority allows them to do whatever they want.

And prices skyrocketed after Gavin Newsom’s latest policy just took effect.

Democrats have a two-to-one advantage over Republicans in the state of California.

That means even fringe ideas can get passed into law.

And Gavin Newsom signed into law a fast-food minimum wage hike to $20 per hour that just took effect.

Buying off unions

NPR reported that “California’s pay hike is a result of a contentious deal struck by labor leaders, including the large Service Employees International Union [SEIU], and fast-food companies. The new wage law applies to fast-food chains with at least 60 locations nationwide, with exemptions for some bakeries and smaller outposts inside grocery stores, airports and other venues.”

Newsom landed himself in hot water when people found out that Panera received a carve-out exempting them from the new minimum wage; Newsom had financial ties to the company’s owner.

While people on the Left are championing the new law, they refuse to acknowledge the laws of economics.

The true minimum wage is zero, meaning that employees will have to lay off workers (or not hire workers they otherwise would have hired) in order to defray costs.

In addition to that, current employees will have their hours cut, and prices are going to increase, which passes on costs to the consumer.

Also, the employees are consumers themselves, so they will be paying more for goods and services at other establishments.

In fact, the New York Post reported that several popular food chains have increased their prices as much as 12% the week Governor Newsom’s minimum wage law went into effect. 

Businesses also cut back on fringe benefits like paid time off and vacation days in order to stay profitable.

Some companies have already said they will use more automation, which means fewer employees, or they might shut down locations altogether.

Good politics, bad economics

Unfortunately, passing these types of minimum wage hikes is popular for politicians, and they often are not around to suffer the economic backlash, or they can pawn it off as “corporate greed.”

Pizza delivery chains are already cutting back on drivers and farming out the work to Uber Eats, DoorDash, and other services.

Ali Bustamante of the left-wing Roosevelt Institute tried to defend the policy saying, “Prices have been so much higher than operating costs over the last decade that these companies could just absorb the high operating costs . . . This is about raising the floor and making sure that $20 being the new minimum wage puts workers on a better economic footing to cover their household needs.”

But people are not getting on a better footing when prices are rising all around them.

Minimum wages are not meant to be wages to support a household.

Only a small percentage of full-time employees even work for minimum wage.

Nevertheless, raising the minimum wage is always popular for politicians even if it is bad economics.

Stay tuned to Blue State Blues for any updates to this ongoing story.