California’s new law raising the minimum wage for fast food workers to $20 per hour has drawn heavy criticism for its potential consequences.
While intended to help low-wage workers, the higher costs are likely to force restaurants to cut jobs, reduce hours, increase automation, and raise prices on menus.
“A study by the nonpartisan Congressional Budget Office last December found that raising the federal minimum wage to $17 an hour from $7.25 by July 2029 could increase wages for more than 18 million people, but also could reduce employment by about 700,000 workers,” the Journal wrote.
Some fast food businesses have already started shedding employees ahead of the law taking effect.
Research indicates higher minimum wages can boost some wages but also lead to job losses.
“Higher wages would increase employers’ costs, raise prices for consumers and depress some demand, the CBO found. Some employers would also turn to technology to try to reduce their reliance on low-wage workers,” the Journal reported.
“California had 726,600 people working in fast-food and other limited-service eateries in January, down 1.3% from last September, when the state backed a deal for the increased wages,” they reported. “Total private employment in the state declined 0.2% over that period, according to state figures.”
Critics argued the high wage mandate will make it difficult for restaurants to stay in business and take on new hires, ultimately hurting many of the workers it aims to help through unintended consequences that were foreseeable.
“Many California restaurant operators are looking for other ways to cover the cost, like reducing hours, closing during slower parts of the day or serving menu items that take less time to make,” the Journal wrote.
“I can’t charge $20 for Happy Meals. I’m leaving no stones unturned,” McDonald’s owner Scott Roderick said.
