Employees encounter layoffs
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California’s new law raising the minimum wage for fast food workers to $20 per hour has drawn heavy criticism for its potential consequences.
Low-wage workers
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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.
Increase wages
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“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.
Job losses
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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.
Employers
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“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.
Fast-food
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“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.”
Stay in business
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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.
Cover the cost
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“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.
Several chains
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Several chains responded by either laying off employees or increasing prices, with some establishments even closing down entirely. For instance, Foster’s Freeze employees saw their wages go from $16 an hour to nothing, illustrating the unintended consequences of the wage hike touted as a victory for workers.
Pizza Hut
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Major Pizza Hut franchisees let go of over 1,200 delivery drivers, while smaller businesses like Vitality Bowls reduced their staff by half in San Jose. Automation initiatives, such as fryer robots and automated drink dispensers, are being explored by restaurants like Jack in the Box as they anticipate further job cuts. As a result, working hours are being reduced, and prices are on the rise industry-wide.
Burger King
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According to a report by The New York Post, prices at a Burger King in the Los Angeles area surged following the implementation of the new law.
Cost
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For instance, the cost of a Texas Double Whopper spiked from $15.09 on March 29 to $16.89 on April 1, a nearly $2 increase in just two days. Similarly, the price of a Big Fish meal skyrocketed by $4, jumping from $7.49 to $11.49, reflecting the exact rise in the hourly wage.
Price hikes
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Additional menu items saw price hikes ranging from 25 cents to a dollar, as per The Post’s investigation. The Democratic Party has held complete control in California, benefiting from supermajorities in the state assembly and lacking opposition. This dominance allows them to implement their policies without transparency or accountability to the public.
Democratic ideals
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California serves as a testing ground for Democratic ideals, akin to other cities like Baltimore, Selma, Detroit, and Oakland. The recent increase in the minimum wage for certain fast-food workers to $20 per hour, a 25% raise from $16, reflects this unchecked power, prompting many to question the state’s direction and leading some residents to consider leaving.
Downplaying
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Despite some advocates downplaying these price increases on social media, arguing that 25 cents to a dollar isn’t significant, they overlook the fact that these hikes represent a substantial percentage of the item’s total price.
Enforcement
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Moreover, these price adjustments occurred within a mere two days of the law’s enforcement, suggesting that further increases are likely on the horizon.
Raising Cane’s
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During a recent interview on CNBC, the CEO of Raising Cane’s, a fried chicken restaurant chain, discussed the repercussions of the new legislation on his business, which has led to price increases. Surprisingly, the CNBC anchor posed a question that seemed to overlook the potential negative impacts of the legislation, focusing instead on the idea that raising prices could counteract the benefits of higher wages for minimum wage workers.
Lack of attention
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The CEO’s response to the question was not particularly illuminating, possibly due to the nature of the interview or a lack of attention. Nonetheless, the anchor’s inquiry raised a thought-provoking point about whether increasing wages truly benefits workers if it results in higher costs of living and dining, ultimately undermining the intended purpose of the wage raise.
Laid off
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The impact of the legislation is particularly evident in the increasing number of workers who have been laid off as a result, with more expected to face the same fate soon.
Economic predicament
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The hesitance to acknowledge this reality, even from prominent figures like the CEO of Raising Cane’s, sheds light on California’s economic predicament. It appears that many individuals in the state either lack a grasp of fundamental economic principles or are reluctant to address them openly.
Directly affected
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However, the fast food workers directly affected by these changes comprehend the situation well, recognizing that the wage increase has not truly translated into a raise for them.
Inflation
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Increasing the minimum wage by a substantial 25% during a period of inflation and economic hardship is undeniably unwise. It represents a misguided attempt to sidestep the real challenges confronting Californians, but in reality, it exacerbates the situation.
Existing issues
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Rather than addressing the existing issues, this approach paradoxically generates more problems. It’s a case of attempting to solve problems by inadvertently magnifying the very issues they aim to resolve, with no signs of stopping.
Rep. Barbara Lee
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California Rep. Barbara Lee said, “Just do the math. Do the math, says the woman who apparently can’t add two plus two. She wants to mandate six-figure incomes for the people who run the cash register at McDonald’s. You notice that she was asked about the economic sustainability of such a plan and did not pretend to even address that concern. That’s because it is, of course, not sustainable at all. $20 an hour isn’t even sustainable. $20 an hour has already caused a bloodbath of layoffs and price hikes. $50 an hour would simply be the end of commerce in California, which means the end of California itself. So, on second thought, maybe her plan has some benefits.”
