Surprise! Job Losses Follow California’s Minimum Wage Increase

California raised the minimum wage of the state’s fast-food workers to $20 per hour on April 1. It wasn’t a silly April Fools joke, and no one was laughing because the law’s devastating effects on restaurants and workers are as bad as its critics predicted.

Last year, California’s Democrat-led legislature passed the bill to hike the minimum wage to $20 for the state’s more than 500,000 fast-food workers, and the state’s Democrat Gov. Gavin Newsom enthusiastically signed it into law despite strong objections from businesses. Newsom claimed the law was “one step 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.” Opponents of the law warned that fast-food restaurants would have to downsize their workforce, scale back remaining workers’ hours, raise prices, or even shut down locations to offset rising costs. The Democrats and the labor unions brushed aside critics’ concerns.

Since April, the critics’ warnings have turned into a harsh reality. Fast-food chains in California, in an effort to adapt to the new regulations, started reducing their workforce last year. The Southern California Pizza Company, for instance, laid off around 841 delivery drivers statewide in December 2023. The California Business and Industrial Alliance (CABIA) reported that fast-food chains have cut nearly 10,000 jobs since Newsom signed the minimum wage hike bill into law last September. These are not just numbers but real people losing their livelihoods. Unfortunately, the job cuts are not over yet. Franchisees for Pizza Hut and Round Table Pizza announced plans to lay off around 1,280 delivery drivers this year.

Harshraj Ghai, the owner of 180 fast-food restaurants in California, including Burger King, Taco Bell, and Popeyes, explained his struggle to keep up with the changes brought by the new law. He had already raised food prices by more than 10 percent, but there is a limit to how much sticker shock customers will tolerate. Few are willing to pay $20 for a burger at Burger King. About 25 percent of the restaurants Ghai owns have digital ordering kiosks. Before the minimum wage hike, he planned to roll out kiosks in the remaining 75 percent of restaurants he owns in 10 years. But since April, he has expedited the process, hoping to complete the kiosk rollout in the next 30 to 90 days. More kiosks mean fewer workers are needed.

The effects of the minimum wage hike are not limited to Ghai’s restaurants. Employment opportunities in the fast-food industry are shrinking as restaurants opt to avoid opening new locations and instead shut down existing ones in California. For instance, Hom of Vitality Bowls has chosen to not to open new locations in California and is instead expanding in other states. Rubio’s Coastal Grill, a popular Mexican fast-food chain, cited “the rising cost of doing business in California” as the reason for its decision to close 48 locations in the state at the end of May.

Recently, CABIA published a mock obituary titled “Victims of Newsom’s Minimum Wage” in USA Today, a poignant reminder of the dire consequences of the $20 minimum wage mandate on workers and the struggling restaurant industry.

Increased Price Creates Decreased Demand

Democrats could have averted these devastating effects if they had grasped this fundamental economic principle: When the price of something increases, demand for it decreases. Numerous studies have demonstrated that the government’s minimum wage mandate has always resulted in job losses for the same workers the law is meant to help.

A recent study by the Congressional Budget Office, for instance, estimates that raising the federal minimum wage to $17 an hour from $7.25 by 2029 could lead to a reduction in employment by about 700,000 workers. Despite claims from Democrats and their labor union allies that raising the minimum wage is an anti-poverty measure, it is of little use to those who are unemployed.

Not Family Breadwinners

It is also disingenuous for Democrats to continue to portray most minimum wage workers as the head of the household who have to support a family with their income. Research shows that about 50 percent of minimum wage workers are younger than 25, and they “typically live with their parents, and many have middle-class lifestyles. While their earnings may be small, their average family income is over $53,000 per year.” Another report found that nearly 14 percent of minimum wage workers have household incomes over $100,000. These young people do not need entry-level positions to make a living but to gain valuable work experiences and skills.

Will Freeland, research analyst at the American Legislative Exchange Council (ALEC), refers to these entry-level jobs as career-building blocks and “a direct pathway to better pay; not a ticket to permanent status in the lower-class as some suggest.” However, the government’s higher minimum wage mandates remove the career-building blocks that the young and inexperienced need the most. Consequently, they “don’t get into the workforce and gain necessary skills to move up because of some central planners and advocates thinking they are smarter and morally superior,” said Carol Roth, an advocate for small businesses, on X.com.

Furthermore, Chris Calton, a research fellow in housing and homelessness at the Independent Institute, pointed out that the minimum wage laws have a racist history. Labor unions first pushed for the minimum wage mandate in the 19th century to prevent railroad companies from hiring black workers. A series of federal minimum wage laws enacted in the 1930s essentially priced many black workers out of the job market and “forced blacks to shift from suffering race-motivated wages to suffering race-motivated unemployment.” According to Calton, the minimum wage laws continue to “have a disproportionately deleterious effect on African-Americans into the present day.” Yet, despite Democrats’ racial justice rhetoric, they continue to promote the minimum wage laws.

Newsom Shields Special Interests

It’s evident that California Democrats are not completely ignorant of the detrimental effects of the minimum wage laws. In March, Newsom signed a new law to exempt fast-food restaurants on government-owned properties, such as “airports, hotels, event centers, theme parks, museums, and certain other locations” from the state’s new $20-an-hour minimum wage law. In May, Newsom and the Democrat-led state legislature delayed the implementation of a $25 an-hour minimum-wage law for health care workers because the law would have cost the state government an additional $4 billion annually and worsened the already dire state budget deficit.

Democrats are adept at passing flawed laws and then doing whatever it takes to shield themselves and special interests from the adverse effects of their legislation. What they won’t do is admit policy failures and reverse the course. Ultimately, California voters who want a thriving economy and a secure environment to raise their families must stop rewarding Democrats’ legislative failures by keeping them in power.