California Governor Gavin Newsom’s successful move to raise the minimum wage for many of the state’s fast-food workers is having a devastating effect on businesses that are being forced to cut labor costs to survive, critics say.
Chipotle, McDonald’s and other major fast-food chains have been raising prices to catch up with the $20 an hour they’ve been paying workers since the new wage went into effect on April 1. The rule applies to restaurants with at least 60 locations nationwide, except those that make and sell their own bread.
The California Business and Industry Alliance (CABIA) said nearly 10,000 fast food jobs have been eliminated since Governor Newsom signed Assembly Bill 1287 last year.
To highlight the law’s unintended consequences, CABIA published a mock “obituary” for the popular fast-food brand in Thursday’s state edition of USA Today.
The ad highlights several restaurants that have had to raise prices, lay off employees and in some cases close locations to stay afloat, and features news clips documenting changes made by brands like El Pollo Loco, Subway and Burger King in the state.
“California businesses have been under full attack and assault for years,” Tom Manzo, president and founder of CABIA, told FOX Business. “This is just another law that puts businesses even more at risk.”
“By giving hardworking fast food workers a voice and a seat at the table, our state is one step closer to fairer wages, safer and healthier working conditions, and better training,” Governor Newsom said in signing the bill.
Manzo said unlike private businesses, governments have options when money dries up, and government officials are living in a “fantasy world” by thinking big wage increases will help workers and businesses.
“We can’t raise the price any more,” he said. “And we’re seeing that. People aren’t going to pay $20 for a Big Mac. It’s not going to happen.”
He noted that to comply with the law, some restaurants are cutting employee hours and will likely turn to automation in the future.
A few weeks before the wage hike took effect, some California fast-food restaurant owners began laying off employees in anticipation of higher labor costs. In December 2023, Southern California Pizza Co., which owns several Pizza Hut restaurants, Announcement of dismissal Approximately 841 delivery drivers across the state are affected.
Meanwhile, rising wages are accompanied by rising fast food prices due to inflation. Implemented by LendingTree The survey found that meals have become so expensive that 78% of consumers consider fast food a “luxury” purchase.
Part of the push for the increase was to give fast-food workers more economic freedom in a state known for its high cost of living, but critics say the jobs were designed as a stepping stone for young people.
“This is an entry-level industry,” Manzo said. “You get a job working in a fast-food restaurant as a kid, and you learn a good work ethic, and that carries over to life.”
