California's war with the free market

 Red State:

It seems apropos that April Fool's Day began the start of a $20.00 minimum wage for California fast food workers. AB1228 or the FAST Act (Fast Food Accountability and Standards Recovery Act) was signed by Governor Gavin Newsom in September 2023 and scheduled to take effect in April of 2024. Despite the warnings from economists, franchisors, and anyone with a brain, Newsom and the Service Employees International Union (SEIU) plowed ahead, claiming this was a victory for workers who could now earn a "living wage." 

It certainly wasn't a victory for the consumer. First, the prices of fast food started to tick up, then Pizza Hut drivers were laid off. The FAST Act is now fully in effect, and so are the unintended consequences. Tuesday, April 2 saw reports of fast-food restaurants cutting hours, laying off workers, and some completely shuttering their businesses.

Welcome to California, where a Big Mac combo will cost you $25.00 and be served to you by a robot. Stevie Wonder could have seen this coming; but hey, power to the people, and all that. [Editor's note: Formatting is original to the source.]

This result shouldn't surprise anyone.  Inflation has driven up operational costs for businesses across the US and shrunk profit margins for major food chains in the past few years.  This has led to higher menu prices (like the "$18 Big Mac") and slowing sales for every major fast food company.  Another anchor dragging on the restaurant business in many regions was at least two years of covid stimulus coupled with rent moratoriums, creating aggressive labor shortages and raising wages in upwards of $16 per hour for brand new no-skill employees.

Small chains and mom-and-pop businesses simply can't compete.  Larger chains raised prices but have also been forced to reduce employees and labor costs through automation, but the layoffs are just getting started. 

Enter California's "FAST Recovery Act" passed into law in 2022 and going into effect in April of this year - The legislation requires a particular set of food chains dealing in certain kinds of products outlined in the law to raise their minimum wages (already at $16 an hour on average) to $20 an hour.  The income increase is limited to chains that have 60 or more locations in the state of California (meaning, the combined number of locations regardless of who owns them must be higher than 60)  Keep in mind that while many of these chains are associated with international corporations, they are owned and run by franchisees; they are still family run businesses.

Mass layoffs are now a guarantee with many restaurants already firing thousands of workers as well as some chains closing multiple locations because the cost of operation will be higher than the benefits.

On Monday, employees at a Foster's Freeze in Lemoore, CA, went to work and discovered that instead of a pay increase, they were receiving their final check.

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Add this former restaurant to the list of other boarded-up businesses on Ventura Boulevard. Between regulations, California crime, and now this new minimum-wage hike, these businesses are opting to shutter their doors, and it is doubtful they will ever return. At 5.3 percent, California has the highest unemployment rate in the nation—expect that number to increase with the layoffs and closures as a result of the FAST Act.

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Legacy media always chooses to ignore AB5, the anti-independent contractor law that took effect in 2020, just before the pandemic. AB5 affected 600 professions, and upended the lives of 4.5 million independent professionals throughout the state. Four years and many lawsuits later, an independent study done by the Mercatus Center shows that AB5 not only reduced the level of self-employment, but it also reduced overall employment, killing W-2 and independent work across the state.

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Leave to California to discover that mandating unsustainable wage increases will lead to fewer jobs. 

See also:

Calif. fast food minimum wage law’s already a disaster — and NY wants some too

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The move — much vaunted by progressives obsessed with economic justice — is going to make the state far less just, with higher costs and fewer jobs.
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