California Trade Group Highlights Severe Effects of $20 Minimum Wage, Issues Full-Page ‘In Memoriam’ Notice

The California Business and Industrial Alliance trade group reported that it analysis of fast food employment in California found a net loss of nearly 10,000 jobs since the state enacted its $20 minimum wage law last year.

The state had already had a $16 minimum wage in place before the new law, AB1228, was signed into law by Gov. Gavin Newsom on Sept. 28, 2023.

In fact Newsom had previously signed a $22 minimum wage bill into law that would have mandated annual increases to the minimum wage thereafter, but agreed to the $20 figure as a “compromise” to be effective April 1, 2024, according to the California Labor & Employment Law Blog.

The new law also established a “Fast Food Council” to set annual increases to the minimum wage for fast food workers through 2029, capped by increases to the Consumer Price Index — which is likely to be high until inflation numbers start coming down.

CABIA’s analysis found that the AB 1228 had already resulted in the lost of 9,500 by January, as fast food companies began making staffing adjustments months before it went into effect.

In an ad called “In Memoriam: Victims of Newsom’s Minimum Wage” and paid for by the organization to publicize its findings, the trade group highlighted several fast food companies and their labor decisions.

At Pizza Hut, two large franchise owners controlling hundreds of California locations eliminated all delivery drivers, the ad states, citing information from Business Insider. More than 1,200 drivers were impacted.

Subway closed 733 stores throughout the U.S., opened 396 new stores and “reacquired” 79 others, for a net loss of 443 stores, the ad said, citing the New York Post. CABIA said that unnamed “experts” argued that such downsizing “could continue as the chain’s Californa shops face an increased minimum wage.”

A franchise owner who controlled 140 Burger King locations in the state planned to “slash worker’ hours and expedite the rollout of self-service kiosks to cut down on labor costs in response to the state’s new $20 minimum wage,” the ad said.

“We have kiosks in probably about 25% of our restaurants today,” the Burger King franchisee, Harshraj Ghai, told CABIA. “However, the other 74% are going to have kiosks in the next probably 30 to 60 days.”

“We can’t move fast enough on this,” he said.

CABIA also cited Scott Roderick, a McDonald’s franchisee who controls 18 California restaurants, as telling the New York Post that he’s had to “rethink his business strategy in the wake of the new law.”

“There is more than extraordinary labor costs stressing restaurants P&Ls right now,” Roderick said.

The ad also cited Cinnabon/Auntie Anne’s, El Pollo Loco, Excalibur Pizza, Mod Pizza, Rubio’s, Vitality Bowls, and other businesses as having to shutter locations, cut worker hours, hiking menu prices and increasing automation in response to the new wage law.

The precise number of layoffs remains cloudy, according to the California Globe.

“During this entire time, from signing in September 2023 to adoption in April to today, the question of how many employees were affected has remained,” the outlet reported. “State figures won’t tell anything until next year, while exact numbers of layoffs per restaurant location has been largely muddled because of some locations normally firing people or hiring employees or new locations opening.”

Chris Kelly, whom the Globe described as “a job placement specialist who helps food service workers transition into other careers,” told the outlet that the impacts of the layoffs can be greater than the statistics reveal.

“And the sad thing is a lot of those people needed these jobs,” Kelly said. “Some are kids getting their first summer job or paying for college. Others are people in need of a second or third jobs to make ends meet. Others need to supplement retirement, or worse, need to work still because they have no retirement.”

“We’ll look at state figures when they come out, but through CABIO’s findings, it is at 10,000,” Kelly continued. “That’s a lot of jobs people needed. That’s a lot of people facing eviction now or having to decide between food and medicine. That’s a lot of people who lose out on valuable job experience. You’re hurting every generation from Gen Z to the Silent Generation here.

“This was such a destructive law, and now we are starting to see the first figures from it. And they are not pretty.”