“Last September, California Governor Gavin Newsom (D) signed a bill mandating a $20 minimum wage for fast food workers. The new wage is among the highest in the county, surpassing even Washington, D.C.’s $17.50 minimum wage. While supporters touted the wage increase as a way to help struggling Californians, detractors warned that restaurant owners would respond by laying off workers, cutting their hours, or speeding up the already starting shift to automation.
The law went into effect in April, meaning that it’s likely too early to tell what the ultimate effects of the law will be. However, a recent report from the Associated Press detailed concerns from several California fast food restaurant owners who say they’ve been forced to reduce hours and hike food prices.
“We kind of just cut where we can,” Lawrence Cheng, whose family owns several Wendy’s franchises told the A.P. “I schedule one less person, and then I come in for that time that I didn’t schedule and I work that hour.”
Juancarlos Chacon, who owns nine Jersey Mikes locations in Los Angeles told the A.P. that he’s resorted to reducing staff, cutting his part-time workers by about 20 employees. He’s also had to raise prices. A turkey sub, for example, that used to be under $10 now costs $11.15. As a result, the amount customers spend, he says, has been falling.
“I’ve been in the business for 25 years and two different brands and I never had to increase the amount of pricing that I did this past time in April,” he told the A.P.”
“if it’s win-win, why just make the minimum $20? Why not $30? Or $100?
Because government requiring higher wages is not a win-win.
Interfering with market prices always creates nasty unintended consequences.”
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“No. 1: Thousands of Californians have already lost jobs because some restaurants closed. Others lost income because their employer cut worker hours. The chain El Pollo Loco cut employees’ hours by 10 percent.
Pizza Hut announced that they will lay off more than a thousand delivery drivers. One such driver, Michael Ojeda, understandably asked, “What’s the point of a raise if you don’t have a job?”
No. 2: Workers who still have jobs will lose them because now their employers have more incentive to automate. Chipotle just created a robot that makes burrito bowls. Even CNN acknowledged, “Some restaurants are replacing [fast food workers] with kiosks.”
“if you artificially hike the price of labor, you reduce demand for workers. In California, this is playing out in terms of lost jobs, increased automation, and other consequences that result when politicians signal a unicorns-and-rainbows vision of the marketplace to their allies and leave the public to deal with the resulting mess.”
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“”A California state law is set to raise fast-food workers’ wages in April to $20 an hour. Some restaurants there are already laying off staff and reducing hours for workers as they try to cut costs,” Heather Haddon reported for The Wall Street Journal. “California restaurants, particularly pizza joints, have outlined plans to cut hundreds of jobs in the months leading up to the April 1 wage mandate, according to state records. Other operators said they have halted hiring or are scaling back workers’ hours.”
This comes after California Pizza Hut franchisees laid off over 1,200 delivery drivers in anticipation of the minimum wage hike. It comes in the wake of McDonald’s and Chipotle Mexican Grill announcing higher menu prices to accommodate labor costs; those higher prices can be expected to drive away some customers, resulting in less need for workers to service lower demand.”
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“less customer traffic isn’t the only way to reduce staffing needs; you can also replace people with technology. Chipotle announced plans to use robots to assemble burrito bowls. El Pollo Loco is doing the same for making salsa. Other restaurants are adopting automated fryers and burger-flippers to reduce the costs of employees.”
“A new California law will require that most food-service workers get paid at least $20 per hour starting next year.
But hundreds of pizza delivery drivers in the Los Angeles area are about to discover Thomas Sowell’s famous adage that the true minimum wage is zero.
Pizza Hut announced Wednesday that it would lay off about 1,200 delivery drivers in Los Angeles, Orange, and Riverside counties, CBS News reported. Pizza Hut franchises are outsourcing delivery to third-party apps like GrubHub and UberEats as a cost-saving measure in advance of the new law taking effect.”
“B 1228 applies to fast-food chains with at least 60 locations nationwide — except for those that make and sell their own bread. The bill’s landmark change is a minimum wage hike to $20 per hour, almost $5 higher than the Golden State’s minimum wage of $15.50.
It would also see the establishment of a Fast Food Council to set wages and make recommendations for working conditions. The council has the power to increase the new minimum wage each year through 2029 up to 3.5% or the average change in the Consumer Price Index for urban wage earners, whichever is lower.
One key part of the bill has been removed since its proposal. Previously, AB 1228 would have made fast-food corporations jointly liable if franchisees committed labor violations, which the NOA believes could have led to “frivolous lawsuits against franchisees” that would then force the larger corporate head offices to exert more control over local operations.”
“When California passed a massive boost in its minimum wage six years ago so that it would eventually reach $15 an hour, the law included a component that tied the minimum to inflation levels. If inflation starts getting too high, the law forces a mandatory increase in the minimum wage.
This week, Gov. Gavin Newsom’s budget director, Keely Martin Bosler, announced that the massive inflation America is seeing is going to force the minimum wage in the state to automatically increase to $15.50 next January. The law requires this automatic adjustment if the inflation rate grows past 7 percent. The Los Angeles Times reports that it’s possible that the minimum wage might rise by another 50 cents if inflation continues.
Bosler, of course, sees only the positive here, saying it will help poor families pay for the higher food prices we’re all enduring: “They have a huge impact to those families that are living off of those lower wages and their ability to cover the cost of goods.””
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“ising wages during this time frame is natural, but it’s also worth noting that California’s unemployment rate continues to be higher than the national average, sitting at 4.9 percent. Just four states and Washington, D.C., have a higher unemployment rate. According to data from California’s Employment Development Department, almost every county in California has higher unemployment rates than the average, and some are running more than twice the national average. Two counties—Colusa and Imperial—have double-digit unemployment rates.
At the same time, businesses have also been hit hard by inflation, and those that operate on tight margins (retail stores, restaurants, and pretty much every small business) are going to have new struggles. Combined, inflation and a higher minimum wage will make it difficult for these businesses to take on new employees and keep the ones they already have.”
“Younger, less-well-educated workers have been especially harmed by recent state-level minimum wage hikes, according to a study issued today by the National Bureau of Economic Research. The paper was written by economists Jeffrey Clemens of the University of California, San Diego, and Michael R. Strain of the American Enterprise Institute.”
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“They found that “over the short and medium run, relatively large increases in minimum wages have reduced employment rates among individuals with low levels of experience and education by just over 2.5 percentage points.” By contrast, smaller increases, or ones resulting from indexing inflation to wages, have effects that are “variable and centered on zero.”
The data also offers “evidence that the medium-run effects of large minimum wage changes are larger and more negative than their short-run effects,” so we will often need time to unfold before we see those bad employment effects blossom.”