California’s choice to set a $20 minimum wage for fast-food workers last September, approved by Governor Gavin Newsom, has caused big changes in the state’s fast-food industry.
The new law has led to almost 10,000 jobs being cut in the sector. As the new wages start, more job losses and changes in how things work, like more automation and higher prices, are becoming clear.
This change affects not just workers and businesses but also has bigger effects on the economy and policies.
What Happened Right Away with Jobs in California?
After Assembly Bill 1287 became law, there was a big effect on jobs in California. About 9,500 fast-food jobs were lost, even though the widespread number of private jobs in the state only went down a little bit.
Big fast-food companies like Pizza Hut and Round Table Pizza started laying off about 1,300 delivery drivers. They’re also using more robots to do jobs like making salsa and frying food. Even El Pollo Loco and Jack in the Box are using robots now.
Why California’s Fast-Food Workers Are Facing Job Cuts and Higher Prices After New $20 Wage Law. The wage increase led to higher prices at popular chains.
Just a month after the new wage law, Wendy’s, Chipotle, and Starbucks raised their prices by 8 percent, 7.5 percent, and 7 percent. Scott Rodrick, who runs some McDonald’s restaurants in Northern California, said he can’t charge $20 for Happy Meals.
Background and Arguments in Lawmaking
The law, AB 1287, was controversial. At first, people thought it was to help unions get more power by letting fast-food workers join. But even though the Service Employees International Union (SEIU) tried for ten years, it didn’t work out.
The SEIU had a big influence in Sacramento when they first made the law. But it got changed because of pushback from the fast-food industry and the possibility of voters saying no in a referendum. Why California’s Fast-Food Workers Are Facing Job Cuts and Higher Prices After New $20 Wage Law?
A strange part of the law lets fast-food places that bake their bread pay less than $20 an hour and this part has caused debate. It seems like this part was added to make Governor Newsom’s political donor happy. He owns some Panera Bread stores in California. But Newsom hasn’t explained it well, so people think he might be favoring his donor.
How Does It Impact Young Workers and the Economy?
The new wage law affects the fast-food industry in a big way, especially because 60 percent of its workers are 24 or younger.
These young workers are a big part of the industry, but they often don’t stay in their jobs for long.
Making employers pay more money to workers adds pressure to an industry where profits are usually pretty small, usually between 5 and 8 percent. Now, California’s fast-food industry has to figure out how to keep going while also following the new law.
This change in the law could have a big impact on how wages are regulated, not just in California but across the country.
