California experiments with social democracy

California, as everyone should know by now, has the nation’s highest rate of poverty as determined by the Census Bureau when the cost-of-living is included in the calculation.

While family incomes in California are not particularly low vis-à-vis those in other states, our extremely high living costs, especially for housing, mean those incomes do not stretch as far as they would elsewhere.

The Public Policy Institute of California takes the issue a bit further by calculating how many Californians are living in near-poverty, using methodology similar to that of the Census Bureau.

Altogether, more than a third of the state’s nearly 40 million residents experience severe economic distress. They are, for the most part, workers in low-pay jobs and their families, and their plight has been exacerbated by the nearly two-year-long COVID-19 pandemic, which has hit them the hardest both medically and economically.

Backed by unions, Gov. Gavin Newsom and his fellow Democrats have vowed to reduce the state’s high levels of poverty and income disparity and this year generated a bushel basket of legislation they contend will narrow the gaps.

California is, in effect, testing long-held beliefs of those on the political left that America should move closer to the European model of “social democracy” by expanding supportive public services and empowering workers in their dealings with employers.

The former include increasing eligibility for Medi-Cal, the state’s health care system for the poor which already covers more than a third of California’s residents, expanding early childhood education to both improve learning outcomes and free more parents to work, and increasing spending on housing for low- and moderate-income families.

The latter is a variety of bills that impose new workplace and compensation standards on industries that employ large numbers of low-paid workers, most notably garment production, agriculture and the ever-increasing distribution centers operated by Amazon and other big corporations.

“We cannot allow corporations to put profit over people,” Newsom said as he signed legislation to ease production quotas in Amazon’s massive “fulfillment centers.”

“The hardworking warehouse employees who have helped sustain us during these unprecedented times should not have to risk injury or face punishment as a result of exploitative quotas that violate basic health and safety,” Newsom added.

“California is holding corporations accountable and recognizing the dignity and humanity of our workers, who have helped build the fifth-largest economy in the world,” Newsom said later as he signed a bill banning piecework pay in the Los Angeles-centered garment industry.

Newsom also signed bills to expand protections for household domestic workers, raise minimum pay for disabled workers, increase criminal penalties for “wage theft” by employers, and provide farm workers with protective gear for wildfire smoke.

It has not been, however, a 100% sweep for union-backed legislation. Newsom vetoed a bill to allow mail ballots in elections for union organization of farm workers and another that would have expanded paid family leave.

Expanding government services will, of course, cost the state billions of dollars, which it can afford now as income taxes pour into its treasury, but whether it can be sustained is questionable. California is inordinately dependent on high-income taxpayers, which means its revenues plummet during economic downturns.

New benefits for workers, meanwhile, will increase employers’ costs, which could drive some to shift operations and jobs to lower-cost locales. The garment industry is particularly competitive, which is why so much of it has already gone overseas.

Higher public and private costs are the flip side of California’s experiment in social democracy. Ultimately, Newsom and the Legislature cannot repeal the laws of economics.