National Review Online
Monday, June 10, 2024
One of the fundamental principles of economics is
that if the price of something goes up, people will buy less of it.
Californians are now learning the hard way that this principle applies to labor
just as much as it does to any other good or service.
Last September, Gavin Newsom hailed the passage of a law
that increased the already high $16-per-hour minimum wage in California to $20
per hour for fast-food workers at chains with more than 60 locations nationwide
(the minimum wage for health-care workers is also being increased).
“California is home to more than 500,000 fast-food
workers who — for decades — have been fighting for higher wages and better
working conditions,” Newsom said at the time. “Today, we take 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.”
In reality, instead of a seat at the table, thousands of
workers are now unemployed.
This month, Rubio’s Coastal Grill filed for bankruptcy after closing 48 of its
California locations. While Rubio’s has faced broader financial struggles for a
number of years, the company cited “significant increases to the minimum wage
in California” among the reasons for its decision.
The move follows months of reports of layoffs in the
state’s fast-food industry leading up to the April 1 effective date of the
government-mandated wage hike.
Last December, two of the major Pizza Hut franchisees in
the state announced they were eliminating delivery service and
laying off thousands of drivers. A Burger King franchisee who runs 140
locations said he was installing self-ordering kiosks to reduce
staffing levels while El Pollo Loco said it was automating more of its salsa-making.
All told, restaurants cut 9,500 jobs ahead of the wage
hike, according to an April analysis from the Hoover
Institution. That does not count those that have come in subsequent months,
after the new wage had fully kicked in.
Meanwhile, the price of fast food has gone up — Wendy’s by 8 percent, Chipotle by 7.5
percent, and Taco Bell by 3 percent.
While the media like to portray fast-food chains as major
multinational corporations, the reality is that many locations are owned by
franchisees that operate more like small businesses.
“We have looked at price, although I can’t charge $20 for
a Happy Meal,” an owner of 18 California McDonald’s locations said to CNN. “My customers’ appetite to absorb menu
board prices is not unlimited.”
California, despite its incredible natural resources and
the presence of the tech industry, currently leads the nation with a 5.3
percent unemployment rate — up from 4.7 percent in September, when Newsom signed the
minimum-wage hike into law. This cannot all be attributed to the
minimum-wage hike but does speak to the failure of the oppressive tax and
regulatory environment in California that has made doing business there so
difficult. Florida, in contrast, has a 3.3
percent unemployment rate.
Just don’t expect the disastrous results of the
minimum-wage hike to convince the state to take a new approach. This November,
there is a ballot initiative to raise the minimum wage on all other workers to
$18 per hour, and polling suggests it is supported by an overwhelming majority
of voters.
We suspect it won’t be long before Californians are
welcoming their new robot overlords.
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