Barely A Month Old, California’s $20-Hr. Fast-Food Minimum Wage Is Already An Economic Disaster
California Democrats who pushed through the state’s punitive new minimum wage must be feeling mighty proud about now. Not only are fast-food joints closing or replacing low-end employees with overseas workers and robots, now the law is costing the very people it was supposed to help while decimating consumers’ wallets. Well done!
The $20-an-hour wage floor foisted on California’s fast-food restaurants, dubbed with the innocent-sounding moniker Assembly Bill 257, was signed into law last fall. It didn’t take long to become a disaster.
Hoover Institution senior fellow and economist Lee Ohanian showed just how quickly bad policies can wreck an economy. And the damage was done even before the law officially went into effect a month ago today.
“Between last fall and January,” Ohanian wrote, “California fast-food restaurants cut about 9,500 jobs, representing a 1.3% change from September 2023.” By comparison, overall employment in California during that period fell just 0.2%.
Those who are losing their jobs in this new higher-wage environment are those most easily replaced, with the lowest productivity — which usually means minority youths with minimal education and little or no work skills. In short, the most vulnerable among us.
“This includes losses at Pizza Hut and Round Table Pizza which are in the process of firing nearly 1,300 delivery drivers. El Pollo Loco and Jack in the Box announced that they will speed up the use of robotics, including robots that make salsa and cook fried foods,” Ohanian added.
Because of escalating costs, many restaurants are also adding “ordering kiosks,” basically firing workers and replacing them with user-friendly computer terminals.
And, to repeat, this was even before the law went into effect. In the coming weeks and months, expect more job devastation, business closures and sharply higher prices paid by consumers.
Indeed, that latter point — higher prices — is already slamming Cali consumers.
Wendy’s has already boosted prices 8%, Chipotle by 7.5%, Starbucks by 7%. “McDonald’s has announced it will be raising prices, and many other fast-food franchises have announced hiring freezes,” Ohanian observed. Since last September, prices have shot up 10% total.
A recent Washington Times headline put it best: “Fast food chains find a way around $20 minimum wage: Get rid of the workers.”
The same Washington Times story adds, “Rather than make less money, restaurant owners are exploring alternative strategies to maintain profitability. Reducing staff numbers appears to be their primary solution for lowering overheads.”
For consumers, there’s nowhere left to hide from the ravages of inflation. If you voted for the people who passed the bill in California’s legislature, and the person who signed it into law — that’s you, Gov. Gavin Newsom — you have no one to blame but yourself.
And it will get worse, much worse.
Part of the bill that has gotten little notice created a “Fast Food Council.” Sounds innocuous, but in fact it’s a non-elected council that will have near dictatorial powers over fast-food outlets’ labor policies, including pay.
In earlier, more-honest times, this used to be called “fascism.” But today the more fashionable term is “worker-friendly progressivism.”
Isn’t it just a noble idea gone bad? Nope. It’s a cynical deal between so-called progressive politicians, frightened food industry groups and unions to bleed consumers, workers and the fast-food industry, all at once.
“After fast food industry representatives tried to block the bill via a ballot measure, the Service Employees International Union (SEIU) sat down with the International Franchise Association and California Restaurant Association to hammer out a deal,” wrote the now very left-wing Teen Vogue, which credits “organizing” for the victory.
Actually, it was blackmail. The California Restaurant Association sold out the national fast-food chains, which are the targets of this law. The SEIU, which had used “strikes” at 450 fast-food locations to show they mean business, basically extorted the fast-food chains.
No doubt, some of those who went on strike are now collecting unemployment. You’ll pay for that, too. “Would you like higher taxes with that burger?”
If you live in another state, this is still very relevant to you. The current national minimum wage is $7.25. But a move is afoot to raise it to $15 an hour or higher.
While $7.25 doesn’t sound like much, virtually no one other than short-term, part-time teenagers earns that amount. In California, for instance, the median hourly wage in fast-food enterprises was about $14 an hour (according to Salary.com), with essentially no workers earning the national minimum, which is almost half less. Same is true across the country.
So if raising the national minimum wage to $15 an hour won’t hurt that many people, why care? Because it will hurt those who can least afford it.
Why?
“The consensus among economists is that 1% to 2% of entry-level jobs are lost for every 10% increase in the minimum wage,” writes David John Marotta at Forbes. “Raising the minimum wage from $7.25 to $15 could mean a reduction in entry level jobs of 11% to 21%. These estimates would suggest between 1.8 and 3.5 million of jobs lost.”
That’s why.
Those are jobs for people who are the most disadvantaged in our society — mostly living in poor minority communities — who lack decent education, have few if any tradable work skills, might not know how to follow simple instructions or speak English fluently, and don’t yet understand the importance of showing up on time or finishing a job once started.
These are the very basic skills that get you a better job at higher pay. A future, in short. But you have to get that first job to learn them. Do the Democrats that passed this bill want a permanent underclass of unemployables that depends on government handouts? Sure looks that way.
Here’s a modest alternative proposal that would benefit everyone, but especially low-end workers: No minimum wage at all, neither in California nor in the rest of the U.S. Then, everyone who wants a job will have one, and businesses won’t have to hire robots instead of people.
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