Do You Want Fries with That Shakedown?

By Will Swaim

Sunday, January 01, 2023

 

There’s a joke circulating in California that goes like this: What’s the difference between the Titanic and the state of California? Answer: The Titanic went down with its lights on.

 

You don’t have to live here to get the dark humor, though it helps. Governor Gavin Newsom led the effort to eliminate oil drilling and ban the sale of new gas-powered vehicles beginning in 2035 — and simultaneously begged us not to run the AC or charge electric vehicles during California’s annual sizzling farewell to summer.

 

So, few of us were surprised when, on Labor Day 2022, the governor signed Assembly Bill 257, which promises to rescue the poor but will in fact immiserate them. The law was set to go into effect today but has been put on hold by a judge, for now.

 

Called the FAST Recovery Act, the new law will do for unions what decades of organizing could not accomplish in the dynamic fast-food business. It neatly eliminates the hard work of organizing unwilling workers by declaring them wards of a state commission comprising 13 political appointees who will govern work and wages in California’s fast-food businesses.

 

In California, political appointees like those proposed in AB 257 are manufactured by the legislature’s Democratic supermajority. That veto-proof majority, in turn, is curated by union leaders — people who raise in excess of $1 billion annually through union dues and spend much of that cash to finance the campaigns of candidates who, once in office, return the favor by doing what the unions tell them to do — things like passage of AB 257.

 

The smart money says California’s elected officials will hustle to appoint union-friendly commissioners who will quickly impose on fast-food operators a $23 hourly wage, more costly benefits, and molecular regulation of work rules.

 

In an industry that operates on razor-thin margins, this will have two immediate predictable outcomes. On the worker side, higher wages, richer benefits, and more cumbersome labor laws will lead to job cuts as franchise operators seek to curb their skyrocketing labor costs. In some places, restaurant owners will rapidly automate; ATM-like ordering kiosks will replace actual people — primarily immigrants and other minority people who, by way of the fast-food business model, are just beginning their ascent on the American economic ladder. Other business owners may simply sell off to larger enterprises whose high volumes will allow them to cope with slimmer margins. That will make it harder for workers to rise into positions of management and ownership.

 

On the customer side, as some franchisees simply close permanently, we’ll see the expansion of what progressives have called “food deserts” in poor communities already underserved by grocery chains. Customer service in the remaining stores will decline and prices will rise.

 

So, in a kind of grim partnership, poor customers and rising workers, immigrants and the native-born, will suffer together. This is the iron law of California progressivism: Claim that new laws will help the poor. When the actual effect turns out to be catastrophic for the poor, blame capitalism/markets/billionaires/racism, and expand government control of the business. Rinse, repeat, and promote as a national — even global — model for equity. And if Californians have anything to say about it, AB 257 will be coming to you, no matter where you live in the United States.

 

The most eye-popping criticism of AB 257 came from California’s own Department of Finance. In June, the department recommended that legislators vote against the bill. Its analysis concludes with language that can be applied to much of California’s regulatory empire, and is worth quoting in its entirety:

 

Finance is opposed to this bill because it creates significant ongoing costs at DIR [the state Department of Industrial Relations]. Additionally, it creates a sector-specific rule-making body within DIR, which could lead to a fragmented regulatory and legal environment for employers and raise long-term costs across industries. Finally, it is not clear that this bill will accomplish its goal, as it attempts to address delayed enforcement by creating stricter standards for certain sectors, which could exacerbate existing delays.

 

“Not clear”? In California, it’s absolutely clear that AB 257 — now law — will not accomplish its goal.

 

Where is such a bad idea conceived? Partly in academia, where professors celebrate as progress the imposition of a failing European model of government–labor–business “cooperation.” Writing in Fortune, Thomas Kochan exulted that, with AB 257, “California has a unique opportunity to launch a path-breaking high-road business and employment strategy for owners and workers in its fast food industry.” He hopes that its success will spread “across the nation.”

 

(Note to Dr. Kochan: You’re professor emeritus at MIT’s much-honored Sloan School of Management. I just live and work in California. But please, never, ever use any form of the infinitive “to break” and “California” in the same sentence. It’s what people in your school’s psych department call a Freudian slip.)

 

In California, the engine running AB 257 is organized labor, particularly the Service Employees International Union (SEIU) and its national “Fight for $15” activist wing.

 

SEIU has struggled lately. In part that’s because the Supreme Court’s 2018 decision in Janus v. AFSCME made government-union membership voluntary. Nearly 30 percent of government workers eligible to join SEIU and other unions have responded by hitting the eject button. The hundreds of dollars those workers save on annual union dues means lost revenue to the unions hoping to represent them. (Disclosure: California Policy Center, where I am president, has played a leading role in helping workers leave their unions.)

 

That rush to the union’s exits has created a cash crisis at SEIU. The union responded by pushing AB 257 with the expectation that the Fast Food Council will move rapidly to recommend universal membership in SEIU as the only solution to low pay and dangerous work conditions.

 

About those work conditions: Many media reports banging the drum for AB 257 relied on a UCLA Labor Center study that claimed to discover that working at your favorite burger joint is like cobalt mining. Vox cited UCLA’s finding that “43 percent of workers experienced workplace injury or illness, nearly half experienced verbal abuse, and a quarter said they were retaliated against by their managers for reporting workplace issues.” So did the Los Angeles Times, the San Francisco Chronicle, CalMatters, and the Sacramento Bee.

 

Reporters were so eager to amplify a story about industrial “wage theft,” “workplace injuries,” and medieval exploitation that none took the time to examine UCLA’s study. In fact, recently published internal UCLA documents reveal that “the study was part of a larger advocacy strategy by the SEIU and its Fight for $15 campaign.” Specifically, the documents show that UCLA’s “independent” researchers outsourced the labor of recruiting and surveying fast-food workers to SEIU. When the study was released, enthusiastic reporters asked to interview the aggrieved workers. Then, UCLA’s documents show, “those labor groups even took efforts to obscure” the snuggly relationship between researchers and union activists.

 

You might be tempted to say that because the UCLA study was junk — corrupt, in fact — we may never know how truly grim things are in the fast-food business. But we do know: You are in fact safer working in a fast-food restaurant than in most other industries.

 

Newsom’s signature on AB 257 was still wet when SEIU unleashed its national media campaign promoting the California law as the solution to labor problems everywhere. “This is LANDMARK labor legislation that presents a way forward for fast food workers in this country,” SEIU said over and over. Using the hashtags #UnionsForAll and #AB257, union activists in Texas, Florida, Missouri, and beyond posted photos of workers spontaneously celebrating California’s win as their own. Were they moved by the spirit of international labor, roused by their own personal experience? They were not. Their messages were crafted and amplified by one of California’s largest unions.

 

Let’s summarize: AB 257 will likely kill the jobs of immigrant and poor men and women who want to work in the fast-food industry — because this work, however difficult, is better than the alternatives. It imposes what union organizers could not achieve through voluntary association. It will raise food prices and limit food options in already struggling neighborhoods. It is opposed by the very regulatory body that is supposed to supervise its implementation. Its passage relied in part on a corrupt “study” by a major state university working with the union that will benefit from the new law.

 

It’s now likely that AB 257 will be opposed at the ballot box. As soon as Newsom signed the bill, an association representing fast-food businesses began gathering signatures for a statewide ballot proposition to repeal it. On December 9, the California secretary of state’s office declared that the association had submitted more than the minimum number of signatures to qualify the measure for the November 2024 ballot. Under California law, that should have postponed implementation of AB 257. Instead, the state’s Department of Industrial Relations announced it would dispense with a century of case law and impose the law on January 1. On December 29, the association announced it will sue the state to uphold its own laws. One day later, on December 30, a state judge cut the baby in half: The state can begin considering appointments to the commission, but it can’t change wages or work rules.

 

Welcome to the California Titanic. Stand atop its soaring prow. Lean out over the vast expanse of uncharted waters. Shout into the wind that you’re the king of the world.

 

And be prepared to swim for your life.