California Governor Gavin Newsom signed a law requiring a $25 minimum wage for healthcare workers back in 2022. Those who would benefit from the proposed increase included support staff like transporters, janitors, and food staff within medical facilities. The law was passed to counter healthcare facilities’ ongoing staffing crisis by offering qualified workers an incentive to work and stay at facilities throughout the state.
The reality of the bold plan to increase healthcare workers’ minimum wages to $25 an hour is proving to be too much for the state of California, however. Newsom is now trying to delay its implementation just weeks before it was set to go into effect, primarily because of its negative impact on the state’s finances.
California is already $45 billion in the red, a shortfall expected to expand to $56 billion within two years. The plan to raise the minimum wage for healthcare workers was estimated to cost the state $4 billion in its first year alone.
California has already seen the devastation that prior minimum wage hikes have had on other industries. The state’s move to increase wages for fast food workers to $20 an hour led to reduced hiring for chains like Starbucks, McDonald’s, Pizza Hut, and Chipotle. In total, it’s estimated that the state has lost 10,000 fast-food jobs since the regulation was enacted. Some restaurants have closed their doors permanently, most have frozen hiring, and many have stopped any planned expansion within the state.
Newsom seems to be learning a lesson from his past interferences and is wary that upping healthcare workers’ wages to $25 will have even more disastrous effects on California’s bottom line.
Unlike fast food restaurants, the healthcare industry relies on government funding. Any raise for workers is, in essence, a taxpayer-funded raise. Even worse, experts predict that patients will finance the increased operational costs through increased healthcare prices.
And like with smaller fast food restaurants, smaller clinics will be most severely impacted. Rural healthcare clinics in California have been given until 2027 to comply with the new mandate.
The criticism of Newsom’s proposal falls along party lines. Republicans observe that the move is another of Newsom’s grand reckless spending scheme and argue it is unsustainable. Democrats are wondering what’s taking so long.
And through it all, healthcare workers are left wondering when, if ever, they will see the promised raise. Healthcare workers’ unions insist that wages must be increased, regardless of the government’s lack of ability to finance it. They see low pay as a driving factor in the industry’s low recruitment rate and believe it is responsible for the staffing shortages. Even worse, they think lower wages will significantly decrease the quality of care patients receive at the facilities. Unions have worked tirelessly to force Newsom to follow through on his promises.
An upcoming state legislature vote is expected soon, focusing on solutions that bridge the gap between Newsom’s promises and the inability of the state to fulfill them financially.
California has until June 15, 2024, to pass a balanced budget. If they fail to do so, legislature members will not be paid. Newsom has proposed several ways to balance the budget, including cutting nearly 10,000 government positions, a savings of $763 million, and a reduction of 8% in operational expenses for a savings of $2.2 billion.
California has delayed many other programs, including postponing thousands of subsidized childcare slots to increase the wages of childcare workers. He will also be dipping into safety net reserves and the rainy day fund over the next two years and has proposed using $8.4 billion in school reserve accounts to continue to fund public schools.
Newsom has proposed an estimated $30 billion in one-time and ongoing spending reductions, including cuts to his pet climate projects. He has pledged not to raise taxes on the already-overburdened California taxpayers and promises that social services will remain untouched.
But Newsom’s recent consideration of fluffy bills, like reparations, promises to keep his state on the verge of financial ruin. Some Californians may want increased minimum wages, but most want someone to take away the governor’s state-sponsored credit card. He maxed that out years ago yet continues to spend without limits. As the old saying goes, he can’t be out of money – he still has checks.
