Shocker! California’s Minimum Wage Hike Leads To Job Cuts

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by Helen Raleigh

California raised the minimum wage of the state’s fast-food workers to $20 per hour on April 1. It wasn’t a silly April Fools joke, and no one was laughing because the law’s devastating effects on restaurants and workers are as bad as its critics predicted.

Last year, California’s Democrat-led legislature passed the bill to hike the minimum wage to $20 for the state’s more than 500,000 fast-food workers, and the state’s Democrat Gov. Gavin Newsom enthusiastically signed it into law despite strong objections from businesses. Newsom claimed the law 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 seat at the table.” Opponents of the law warned that fast-food restaurants would have to downsize their workforce, scale back remaining workers’ hours, raise prices, or even shut down locations to offset rising costs. The Democrats and the labor unions brushed aside critics’ concerns.

Since April, the critics’ warnings have turned into a harsh reality. Fast-food chains in California, in an effort to adapt to the new regulations, started reducing their workforce last year. The Southern California Pizza Company, for instance, laid off around 841 delivery drivers statewide in December 2023. The California Business and Industrial Alliance (CABIA) reported that fast-food chains have cut nearly 10,000 jobs since Newsom signed the minimum wage hike bill into law last September. These are not just numbers but real people losing their livelihoods. Unfortunately, the job cuts are not over yet. Franchisees for Pizza Hut and Round Table Pizza announced plans to lay off around 1,280 delivery drivers this year.

Harshraj Ghai, the owner of 180 fast-food restaurants in California, including Burger King, Taco Bell, and Popeyes, explained his struggle to keep up with the changes brought by the new law. He had already raised food prices by more than 10 percent, but there is a limit to how much sticker shock customers will tolerate. Few are willing to pay $20 for a burger at Burger King. About 25 percent of the restaurants Ghai owns have digital ordering kiosks. Before the minimum wage hike, he planned to roll out kiosks in the remaining 75 percent of restaurants he owns in 10 years. But since April, he has expedited the process, hoping to complete the kiosk rollout in the next 30 to 90 days. More kiosks mean fewer workers are needed.

The effects of the minimum wage hike are not limited to Ghai’s restaurants. Employment opportunities in the fast-food industry are shrinking as restaurants opt to avoid opening new locations and instead shut down existing ones in California. For instance, Hom of Vitality Bowls has chosen to not to open new locations in California and is instead expanding in other states. Rubio’s Coastal Grill, a popular Mexican fast-food chain, cited “the rising cost of doing business in California” as the reason for its decision to close 48 locations in the state at the end of May.

Recently, CABIA published a mock obituary titled “Victims of Newsom’s Minimum Wage” in USA Today, a poignant reminder of the dire consequences of the $20 minimum wage mandate on workers and the struggling restaurant industry.

Increased Price Creates Decreased Demand

Democrats could have averted these devastating effects if they had grasped this fundamental economic principle: When the price of something increases, demand for it decreases. Numerous studies have demonstrated that the government’s minimum wage mandate has always resulted in job losses for the same workers the law is meant to help.

A recent study by the Congressional Budget Office, for instance, estimates that raising the federal minimum wage to $17 an hour from $7.25 by 2029 could lead to a reduction in employment by about 700,000 workers. Despite claims from Democrats and their labor union allies that raising the minimum wage is an anti-poverty measure, it is of little use to those who are unemployed.

Not Family Breadwinners

It is also disingenuous for Democrats to continue to portray most minimum wage workers as the head of the household who have to support a family with their income. Research shows that about 50 percent of minimum wage workers are younger than 25, and they “typically live with their parents, and many have middle-class lifestyles. While their earnings may be small, their average family income is over $53,000 per year.” Another report found that nearly 14 percent of minimum wage workers have household incomes over $100,000. These young people do not need entry-level positions to make a living but to gain valuable work experiences and skills.

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Why didn’t someone WARN them?

Raising the minimum wage in CA is never to help the working poor who hold those jobs.
It is cover for the unions giving themselves raises without walking off the job.
Most union wages are tied to the minimum wage, so when it goes up, so do their wages.

People who really intend to stay at a minimum wage job for their working career are few and far between.
However, people of all ages do hold those jobs for various reasons, so it looks like lifelong careers for people.

I know of at least one Burger King, that is boarded up in San Jose CA. Good going Newsom, you’re a real man of the people…..rich union people that is.