From his first day in office in January 2019, Newsom called the manifestations of California’s inequality – homelessness, poverty and rising costs – “moral imperatives,” not just policy priorities. “So long as they persist, each and every one of us is diminished,” he declared.
Those inequalities persisted and were laid bare by two years of the COVID-19 pandemic, a tumultuous time that saw the governor overcome a Republican-led effort to recall him from office last September.
Now with the pandemic receding, the economy rebounding and no major political opposition standing in his way to reelection this year, Newsom has the opportunity to return to his original priority of reducing the stain of poverty on the state.
He is expected to address the issue today in the final State of the State speech of his first term. ”There is going to be an explicit call out on inequality, and the stakes,” said an aide, who spoke only if not named because they were not authorized to give a preview of the speech. “One of the themes of the speech is going to be democracy, and tying that to how unchecked inequality undermines democracy.”
Some experts and advocates say Newsom’s efforts to close the economic divide may determine his legacy – and help set him apart from his predecessor and fellow Democrat, Jerry Brown, who insisted state government could only go so far in closing the divide between rich and poor.
“If the comparison is past governors in California, he’s trying to do a lot,” said Chris Hoene, director of the California Budget & Policy Center, a nonprofit that researches policy affecting low-income Californians. “If the comparison is where we were when he took over as governor, and where we are today, he’s facing a ton of headwinds. And the urgency and the need drives expectations about him doing more.”
Nationally, the jobs recovery is in full swing, and though California has lagged other states, it could at last see improvements as mask mandates loosen and the economy returns more to normal. The pandemic – and record state budget surpluses – have given Newsom the opportunity to address the state’s inequalities. The Democratic leaders of the state Assembly and Senate leaders also say they want to use the budget to create a more inclusive recovery and more equitable economy.
But Assembly GOP leader James Gallagher of Yuba City said it’s the policies of Democrats that are driving inequality.
“We have a huge surplus because the wealthiest are doing so well,” he said. “That doesn’t tell the story of the middle- and low- income earners in this state.”
For instance, he said, families are getting hammered by the rapid increase in gas prices, which according to AAA has now topped an average of $5 a gallon – an increase accelerated by the Ukraine war. Gallagher and other Republicans also blame the state’s gas tax, which Democrats raised in 2017 under Brown to repair roads and bridges and expand mass transit. Newsom has proposed putting off a scheduled July increase, but the governor has met resistance from his own party in the Legislature. The climate change agenda of California Democrats has also driven up the cost of utilities, further deepening inequality, Gallagher said.
“I think he genuinely cares about this issue, but I think that his policies – the policies of either he, or Democrats in the Legislature – have made the problem worse,” Gallagher said. “The other problem is that the governor has a lack of follow-through. He’s big on pronouncements and announcing new programs, but pretty short on implementation and results.”
In his State of the State speech last year, Newsom returned to the theme of inequality, indicating his belief the pandemic was “widening gaps between the haves and the have-nots.” “California’s most acute preexisting condition remains income inequality,” he said.
In his three years in office, he has pushed through several significant initiatives:
Still, advocates say the state could be doing more to shrink the economic divide.
While recessions tend to widen income disparities between rich and poor, earnings have increased for low-income workers while unprecedented government relief kept millions from falling into poverty. That’s despite the sharp downturn in 2020, and the disproportionate number of pandemic-related job losses hitting low-wage sectors. During the recovery, some of the biggest gains are in the leisure and hospitality sectors, according to Sarah Bohn, a vice president and policy research chairperson with the Public Policy Institute of California.
“Wages are picking up the most at the low-end of the spectrum, even though we’re still in a recovery period with elevated unemployment,” Bohn said. “It might be that inequality is actually decreasing during the pandemic – which is kind of crazy, and we’ll know more soon – but when you just look at the wage statistics, the sectors that are lowest paid have the highest increase in wages.”
Nationally, data from the Atlanta Federal Reserve Bank shows typical wages for the bottom 25 percent of earners growing faster than other income groups. Meanwhile the Biden administration has highlighted research from two influential U.C. Berkeley economists underscoring that economic growth has been broadly shared since he took office in January 2021.
In California, income inequality statistics for 2020 are not yet available, but the trend has been one of dramatic widening over the long run, with the modern economy placing a premium on highly educated workers. Analyzing pretax income and including cash from some safety net programs, the PPIC found income growth for the bottom 10 percent of families in California lagging significantly behind the top 10 percent from 1980 to 2019.