New Minimum Wage Bill Costs Californians Nearly 10,000 Jobs

Governor Newsom claims a higher minimum wage will help create a more stable workforce.

Fast food restaurants in California like McDonald's are struggling due to an increase in the minimum wage. AP

A new California bill that raised the state minimum wage has cost the Golden State nearly 10,000 jobs since last September, according to a pro-business watchdog group.

Governor Newsom signed Assembly Bill 1228 into law last September, which mandated a $20 hourly minimum wage for fast food employees, an increase of 25 percent. The law became effective on April 1 of this year.

In the aftermath of the minimum wage hike, a pro-business group, the California Business and Industrial Alliance, published an advertisement detailing the kinds of places that have had to close their doors or lay off their employees in response to the new law. 

The Hoover Institute estimates that between 9,500 and 10,000 employees have been laid off since last fall. Businesses such as McDonald’s, Subway, and Burger King now all face the dilemma of cutting operating costs, which often means laying off staff, or facing the closure of various locations.

When he signed the bill, Mr. Newsom said that the new law would bring the state “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.” 

The advertisement documents the closure of various fast food locations as well as a local restaurant, Bar Moruno. 

“The economics of owning a restaurant are completely out of whack right now,” the former chef of Bar Moruno, Chris Feldmeier, said. “We used to try to keep our labor costs under 30 percent, but now they’re inching up to 40 percent. With cooks making $22 to $25 an hour, it’s just hard for a small, private restaurant.”

Within a week of April 1, Capitol Weekly reported several fast food chains were announcing layoffs, severely affecting over 1,200 delivery drivers, and several pizza outlets in California announcing permanent closure.

Rubio’s Coastal Grill filed for Chapter 11 Bankruptcy this week, after closing down 48 of its locations in California, according to the New York Post.

CBS reported that the average California restaurant is now facing an increased annual cost of $250,000 to account for the minimum wage increase.

The president of California Business and Industrial Alliance, Tom Manzo, told FOX News that two of California’s biggest problems are consistent rising costs and a “continued anti-business climate” since the bill took effect.

“Unprecedented wage hikes have unprecedented consequences, especially in California where the odds are already stacked against businesses,” Mr. Manzo said in a recent statement. “The rapid job cuts, rising prices, and business closures are a direct result of Governor Newsom and this short-sighted legislation.”

Mr. Manzo told FOX that individual franchisees are not multi-million dollar corporations like the companies they represent, and because of this, individual locations are responsible for meeting payroll, earning a profit, and incurring losses.

Mr. Newsom said that the bill would help bring about a “stable and engaged workforce” and especially help people of color, who comprise 80 percent of the fast food workforce, according to a report from Courthouse News Service.

The governor’s press office reported, in a statement on X, that AB 1228 has helped California add over 4,000 jobs in the fast food industry, contrary to reports claiming the bill has resulted in job cuts.

Many fast food employees also say that they cannot make ends meet on their previous, $16 minimum wage.

“Even though we are the engine of a billion-dollar industry, too many of us struggle to keep up with rent, our bills and the rising cost of living,” a McDonald’s employee Anjelica Hernandez told the Guardian.

In response to increased wages, Blaze Pizza, a California-based fast food chain, is moving its headquarters to Atlanta from Pasadena. The business sees more potential for growth in Georgia. 

Recent studies show a trend of businesses increasingly relocating out of California because of such high costs. Since April, prices at Wendy’s have increased by 8 percent, at Chipotle by 7.5 percent, and at Starbucks by 7 percent, according to a report from the Hoover Institute.

On Blaze’s website, California is listed under “limited availability” for employment opportunities. Other states, such as Texas and Florida, are tagged with “Inquire Now.”

Many business owners have also experimented with technological replacements for some aspects of human labor, such as preparing fried food and dispensing drinks, as the New York Sun previously reported

One Burger King franchisee on the West Coast announced that it planned to install digital kiosks at all of his locations in two months in an effort to offset costs, an example of how the minimum wage increase could have long-lasting effects on the general job market, according to the Daily Mail.

The New York Sun

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