Athena Hallet
California’s move to increase the minimum wage to $20 an hour for fast-food workers may seem like a step in the right direction to most. However, it’s creating a lot of upset, with both the economy and restaurant owners alike. Let’s take a closer look as to why this initiative may just backfire.
Will The New Minimum Wage Be A Flop
Known for its extremely high cost of living and taxes, this state has a track record of ambitious policies that often don’t pan out the way it had hoped.
The recent increase in minimum wage is likely to continue on this same path, leading to an uptick in job loss and higher prices statewide.
The New Standard
This legislation places fast-food workers in California at the forefront of the pay scale in the industry, significantly exceeding the standard minimum wage of $15.50 per hour.
To be subjected to this new mandate, fast-food chains have to operate at least 60 locations nationwide. With the exception of places like Panera Bread, which have exemptions because they are making and selling their own bread.
Fast-Food Prices Go Up
This new law has prompted chains such as like McDonald’s, Chipotle Mexican Grill,
and Jack in the Box to increase their menu prices in an effort to mitigate the higher wage costs.
Repercussions Of Wage Increase
This initiative has the potential to add to the states reputation of being unaffordable,
With most residents already finding themselves bearing the heavy burden of excessive utility bills and housing costs.
The High Cost Of Living
Sacramento’s combination of excessive taxation, extravagant spending, and overregulation has defined California into a difficult state to live in for many residents. has sculpted California into a challenging state for many residents.
Leading to a net loss of 1.2 million people in just the last three years alone, a steeper decline than any other state, even surpassing New York by 35%.
Is It Cost Effective For Businesses
Portrayed as a move against corporate greed, the truth is that businesses operate on thin margins. With additional labor costs at $20 per hour, many employers don’t feel like the math is adding up.
This could ultimately lead to less jobs and higher prices, as many establishments are already starting to see.
Good Intentions
Despite the good intentions of trying to level out the minimum wage in California to help with income disparities, the outcome is portraying a very different story.
This recent legislation that is meant to ensure that fast-food workers have a “living wage” has inadvertently brought about a classic case of good intentions failing in practice.
Freezes On Hiring
In reaction to California’s recent minimum wage increase, fast-food chains all over the state are being forced to implement a hiring freeze, with some even announcing significant layoffs.
This is a notable change for an industry that employs close to half a million in the state.
California Is Moving Towards Automation In Restaurants
As the labor costs continue to go up, fast-food giants such as McDonald’s are making a shift towards automation. Last year, McDonald’s invested millions in developing its first fully automated restaurant.
Jack in the Box and El Pollo Loco are also making adjustments towards robotics to handle cooking and cashier tasks.
The Trend Of Outsourcing Fast-Food Positions
In places where automation isn’t an option, fast-food jobs are being outsourced. This showcases the impending layoffs of around 1,100 Pizza Hut delivery drivers, with similar cuts at Round Table Pizza.
Customers are not going to have to rely on the services of delivery apps, which are also facing criticism because of California’s Assembly Bill 40.
Strategies For Survival
This shift towards technology is seen more as a strategy for survival as the increases of labor costs puts more and more stress on business owners.
As companies make moves to adapt by reducing their reliance on human labor, the environment of fast-food employment in California is positioned for a serious transformation.
Wage Hikes Ripple Across All Businesses
The ramifications of this wage increase extend beyond the larger companies. Small business owners, like Brady Farmer of Chef Bradley Cook’s Catering, warn that consumers will feel the impact across the board—
even tater tots will see an increase in price.
Inflation Struggle
Co-owner of Crab Hut since 2007, Kim Phan, reflects on the rapid rise in living costs. Highlighting that businesses are struggling to keep the pace.
When Crab Hut first opened, a pound of crawfish was priced at $8.99, but this year it’s around $23 to $24, depending on the season. That is a notable difference in price.
Small Businesses Struggle With Wage Increase
Small business owners are struggling with the consequences of California’s minimum wage increase, even if they don’t fall under the legislation requirements.
One business owner emphasized the significant expenses that come with managing all aspects of the business, everything from shopping to transportation, which can add up to an extra $20 to $200 a day.
No One Wins
Kim Phan stresses that the continued minimum wage increases are an unwinnable battle against inflation, where ultimately no one wins.
She continues by emphasizing the importance of looking at the bigger picture, pointing out that even with increased wages over the years no one really benefits.
Unforeseen Outcomes
Unfortunately,
the disconnect between political decisions and their real-world effects means policies intended to secure votes might end up harming those they aim to help, not just once but repeatedly
Layoff Threats
Some contend that corporations are overstating the impact and won’t actually follow through with massive layoffs.
However, this viewpoint disregards the pragmatic aspects of operating a business, such as managing payroll or employing minimum-wage workers.
The Dual Impact
In Addition to job cuts, increasing the minimum wage to $20 an hour also causes a hike in prices.
This specifically affects individuals that are at or below the poverty line, who tend to be frequent flyers at fast-food chains.
Rising Costs Pushing Residents Out
As the cost to operate a business continues to increase, the state might see a rise in residents choosing to relocate out of the state.
This could ultimately lead to a decline in California’s overall economic welfare.
Difficult Decisions
Essentially, establishing the minimum wage at $20 acts as a prohibition on any job that pays less, forcing Californians into difficult decisions,
relocate to states with more lenient wage laws, earn money through unregulated “under the table” jobs, or depend on welfare.
So, What’s Next
Complicating matters further, the new law includes the formation of a Fast-Food Council, which has the authority to further increase the minimum wage for fast-food workers by up to 3.5% annually.
This has the potential to lead to an unstable fast-food landscape, pushing the industry even further into automation or significant downsizing.
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