California Gov. Gavin Newsom’s successful effort to raise the minimum wage for many of the state’s fast-food workers is having a devastating impact on businesses, which have been forced to cut labor costs to survive, critics say.
Prices at major brands like Chipotle, McDonald’s and other fast-food giants have risen to keep up with the $20 an hour workers have been paid since the new wage took effect on April 1. The rule affects restaurants that have at least 60 employees. locations across the country, except those that make and sell their own bread.
The California Business and Industrial Alliance (CABIA) said nearly 10,000 jobs have been cut at fast-food restaurants since Newsom signed California Assembly Bill 1287 into law last year. To highlight what it believes are the unintended consequences of the law, CABIA placed an ad in Thursdsay’s statewide edition of USA Today featuring fake “obituaries” of popular fast food brands.
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It highlights several restaurants that had to raise prices and lay off employees to stay afloat, and in some cases even closed stores. The ad features news clips documenting the changes made by brands like El Pollo Loco, Subway and Burger King across the state.
“California businesses have been targeted and attacked for years,” CABIA President and Founder Tom Manzo told FOX Business. “It’s just another law that further puts businesses at risk.”
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When he signed the bill, Newsom said the state was “one step closer to fairer wages, safer and healthier working conditions, and better training by giving hardworking fast-food workers a stronger voice and a seat at the table.”
Governments, unlike private companies, have options if they run out of money, said Manzo, who said officials were living in a “fantasy land” by thinking drastic wage increases would help workers or businesses.
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“You can only raise prices so much,” he said. “And you see it. People are not going to pay $20 for a Big Mac. That’s not going to happen.”
He noted that to comply with the law, some restaurants have reduced working hours and will most likely turn to automation in the future.
In the weeks before the wage hike took effect, some fast food owners in California began letting go of workers in anticipation of increased labor costs. In December 2023, the Southern California Pizza Co., which owns several Pizza Huts stores, announced layoffs of approximately 841 delivery drivers across the state.
Meanwhile, the wage increase comes as inflation has resulted in higher prices for fast food products. A recent study operated by LendingTree found that 78% of consumers now consider fast food a “luxury” purchase because meals have become so expensive.
FOX Business has contacted Newsom’s office.
Part of the push for the increase was to give fast-food workers more financial freedom in a state known for its high cost of living. However, critics argue that fast food jobs were intended for young people as a stepping stone.
“It’s a start-up industry,” Manzo said. “As a kid you get a job in a fast food restaurant and you learn a good work ethic and that carries with you into life.”
Original article source: California’s fast-food wage hike has had damaging effects and is putting businesses ‘at risk,’ critic says
