Since Gov. Gavin Newsom increased the state’s minimum wage to $20, thousands of people have lost their jobs and have been forced to pay inflated menu prices.
This has had a significant impact on the fast-food industry in California as workers bear the brunt of the fallout.
$20 Minimum Wage Was a Compromise
While the $20 minimum wage may seem like a massive jump compared to what it was before, this was actually a compromise, with the initial number being $22.
The current rise is 25% from $16 per hour, with the $22 rejected by businesses who made the compelling case that they wouldn’t be able to cope with such a sudden increase.
Only Fast Food Chains Are Affected
Not all fast food restaurants are said to be affected by the minimum wage increase, as only those who have 60 or more restaurants across the US will have to pay the increase.
There was some concern beforehand that most small businesses would struggle with this increase, but they seem not to be affected by it.
The Compassionate Legislation Isn’t Very Compassionate
The whole point of not increasing the minimum wage by as much as was previously propositioned was so that it would be a bit more compassionate towards businesses.
It was also done so fast food workers could have more money to afford the basic necessities. However, as many of these workers are now losing their jobs due to this increase, there are some questions as to how compassionate this supposed compassionate legislation actually is.
Hopes a Raise Will Increase Number of Employees
One of the main hopes of this new legislation was that it would encourage more people to go and work in the fast food industry if it had the highest minimum wage across various industries and the rest of the US.
But as people are seeing mass layoffs as a result of this increase, no one wants to even apply for jobs in the industry because they fear getting fired as soon as they are hired.
CABIA Input
The California Business and Industrial Alliance (CABIA) President Tom Manzo explained why organizations are “fed up” with California’s policies during “Fox and Friends”.
Meanwhile, Americans struggle to bear the cost of the product that is presently thought to be a “luxury item” by certain shoppers.
Manzo’s Opinion
“The biggest issue California faces is continued increased cost and a continued anti-business climate,” according to Manzo.
He went on to say: “That’s why we decided to run this ad in the first place, and… business owners are fed up… Quite frankly, it’s having a ripple effect now on everybody.”
Mass Layoffs
CABIA said almost 10,000 positions have been cut across fast food eateries since Newsom introduced California Assembly Bill 1228 into law last year.
CABIA has published an advertisement with mock “obituaries” of popular fast food brands in Thursday’s statewide edition of USA Today to highlight what it claims are the law’s unintended consequences.
Workers Laid off Before the Increase
Despite the new minimum wage increase not coming into effect until April 1, 2024, some businesses had begun laying off workers long before this.
This was done because it had been predicted that the new increase would be tough for businesses and would only result in mass layoffs and price increases. Some employees found out they were going to be losing their jobs towards the end of 2023.
Pizza Hut Cuts 1200 Jobs
One restaurant that has already started laying off workers is Pizza Hut. In December 2023, around 1,200 delivery driver jobs were cut, and other franchises announced they were eliminating their delivery services entirely.
Pizza Hut hopes that the delivery experience remains the same for its customers, but it’s not good news for those who have lost their jobs or those living in areas where deliveries will be affected.
Spreading Awareness
CABIA’s promotion features various eateries that have needed to raise costs and lay off laborers to remain above water and, at times, shut down stores.
The promotion highlights news clips recording changes made by brands like El Pollo Loco, Subway, and Burger King across the state.
Restaurants Relying on Robots
As they are having to reduce their human staff, many fast food restaurants have since decided to start relying on robots instead.
As they don’t have to pay them wages, it should theoretically work out cheaper in the long run. El Pollo Loco and Jack in the Box are two restaurants that plan on doing this, including using them to prepare salsa and cook fried foods.
Automation Is Increasing
Many fast food restaurants are also planning on increasing their reliance on automation to help them cut back on staff.
This means eliminating staffed kiosks and relying only on kitchen staff to prepare and cook the food.
Need for Change
“That’s why we continue to advocate because legislators, the governor, they need to wake up,” Manzo said. “You cannot be this anti-business.”
“We’re going to continue to fight,” he continued. “We advocate for small to medium-sized businesses, people that don’t have a voice… We need to change the direct trajectory, and that’s what we’re going to do. That’s our mission.”
Newsom’s Rebuttal
The CABIA’s claims that there would be a loss of fast-food jobs were disputed by Newsom’s office.
According to the governor’s spokesperson, the U.S. Bureau of Labor Statistics showed that limited-service restaurants added 4,500 jobs in California between September 2023 and April 1, and from April 2023 to April 1, 6,600 new fast food jobs were created.
Luxury Expense
Due to high prices, nearly eighty percent of Americans now consider fast food to be a “luxury” expense.
Menu prices have also increased due to the wage increase. 68 % of respondents to a survey conducted by LendingTree agree that the prices of fast food items are excessive.
Fast Food Shouldn’t Be a Luxury
Fast food has long been the quick and easy option for people, with the bonus being that it is cheap. Or at least it used to be.
But now it is seen as a luxury item, California business leaders have said that this shouldn’t be the case and that changes need to be made so that fast food can go back to being cheap.
Fast Food Traffic at an All Time Low
One of the other issues fast food restaurants are having is that the footfall since the April minimum wage hike has gone down significantly.
Compared to other fast food restaurants throughout the rest of the US, California’s outlets are struggling the most. The reason seems to point towards the $20 minimum wage increase.
Customers Are Also Losing Out
It’s not just the workers who are losing out; customers are also at a loss due to the price increases of their favorite fast food places as a result of the minimum wage increase.
Chipotle has said it will be increasing its prices by as much as 18%, meaning customers are less likely to walk through its doors as they can no longer afford the price increases on top of everything else.
Minimum Wage Concerns
During “Fox & Friends First,” Restaurant Business Magazine editor-in-chief Jonathan Maze refuted the notion that the minimum wage increase benefits workers, citing concerns regarding the timing and severity of the increase.
Maze stated, “It’s a tough thing to do. You got two issues. You have the fact that it was done almost overnight. You have the fact that it was a 25% increase in the wage rate. Both of those things, happening simultaneously, is a really hard thing for restaurants”
California Workers Want $30 Wage Increase
While businesses are struggling and some leaders are saying the $20 minimum wage increase needs to go down, California workers are asking for their wage to be raised to $30.
As many workers are struggling to afford the basic cost of living, an increase to $30 would be great for them; however, it would hurt businesses financially and could also lead to more layoffs.
Affordable Reputation
That’s what Maze contended because costs have inflated, and Americans are eating out once in a while compared to before as it keeps on influencing the business’ “reputation” as a cheaper choice for everyday families.
Maze stated, “This has been a challenging environment. If you looked at what McDonald’s had reported just a couple of weeks ago, their prices are up 40% since 2019.”
Maze’s Interpretation
According to Maze: “Their costs are up since 2019. You had, right after the pandemic… a dramatic increase in food costs. You had a dramatic increase in labor costs.”
He went on to say, “Insurance costs are up. Lending rates are up. Everything costs a lot more. Construction costs are up, and that requires companies to increase prices.”
Hiring Freeze
Now that companies are struggling to pay their employees many fast-food companies have placed a hiring freeze and have announced mass layoffs.
Along with a high tax and cost of living the latest in government policies is putting a strain on businesses.
In increasing the minimum wage Newsom has caused division amongst political commentators who struggle to see the rhetoric in causing such a dramatic shift.
