California’s fast-food industry is feeling the effects of Gov. Gavin Newsom’s new $20 minimum wage law, with a reported net loss of over 5,400 jobs since January, according to a new report from the California Globe. While Newsom insists this wage hike is “modest” and manageable, critics argue it is crippling the fast food sector. The impact has already been felt in layoffs, restaurant closures, and reductions in staff hours. Despite the negative press, Newsom remains firm, even dismissing job loss claims as media-driven exaggerations.
Key Facts:
– California’s fast-food industry has lost over 5,400 jobs since the wage hike took effect.
– The minimum wage increase, mandated by Assembly Bill 1228, represents a 25% raise to $20 per hour.
– Neighboring states, such as Nevada and Oregon, have seen job gains in fast food during the same period.
– 74% of California fast-food restaurant owners reported a higher likelihood of closing their businesses.
– Many fast-food chains have resorted to layoffs and price hikes to cope with the new labor costs.
The Rest of The Story:
California’s fast-food industry has been struggling since the state implemented a mandatory $20 per hour minimum wage in early 2024, spurred by Assembly Bill 1228. The law, which represents a 25% wage hike, was initially heralded by Gov. Newsom as a necessary step to support low-income workers. However, the consequences have been severe, with over 5,400 fast-food jobs lost since the law took effect. Businesses have been quick to respond with layoffs, store closures, and reduced employee hours.
Rebekah Paxton, the research director at the Employment Policies Institute, explained that California’s fast-food job losses stand in stark contrast to neighboring states like Nevada and Oregon, where fast-food jobs have continued to grow. She also highlighted that this is the worst job growth rate in the industry since the Great Recession.
In the months following the wage hike, some businesses have had no choice but to shut down. Pizza Hut alone laid off over 1,200 drivers and shifted deliveries to third-party services such as DoorDash and Uber Eats. Even Rubio’s Coastal Grill, a beloved Mexican food chain, shuttered 48 stores across California due to rising operational costs, including wages.
California Governor Gavin Newson raised the minimum wage of fast food workers to $20/hour and now companies are doing massive layoffs some have to shut down.
Democrat policies never fail to hurt American workers. pic.twitter.com/l7BfoRePcU
— Libs of TikTok (@libsoftiktok) April 4, 2024
While Gov. Newsom defends the law, claiming that critics have exaggerated the impact, the data speaks otherwise. Paxton noted that California fast-food owners are increasingly pessimistic about the future, with many predicting more closures, layoffs, and price hikes in 2025 if conditions do not improve.
Commentary:
The loss of over 5,400 fast-food jobs in California isn’t surprising. Artificially inflating wages beyond what the market can sustain always leads to such outcomes.
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Fast-food restaurants operate on slim margins, and mandating a 25% wage increase forces businesses to cut costs in the only areas they can—staff hours, employee positions, or even entire stores. This is a clear case of government overreach forcing businesses into a corner where layoffs and closures become inevitable.
The idea that these businesses are large corporations swimming in profits is far from reality.
Most fast-food franchises are small operations run by individuals or families trying to stay afloat. Forcing them to raise wages to $20 per hour without considering the economic realities of their business is a recipe for disaster.
Unfortunately, it is California’s workers and consumers who will ultimately pay the price.
The Bottom Line:
California’s fast-food industry has been hit hard by Gov. Gavin Newsom’s wage hike, with over 5,400 jobs lost and more likely to follow.
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While the governor insists this law benefits workers, the evidence suggests it is harming the very people it was meant to help.
If businesses continue to close and jobs keep disappearing, California’s fast-food workers may soon find themselves without jobs to fill.
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