California businesses are hemorrhaging money, and the governor is more interested in looking good than stopping the bleeding. A groundbreaking survey shows that most California fast-food businesses have been forced to cut employees’ hours, close their doors or even consider moving to another state.
Since Gov. Gavin Newsom signed a $20 minimum wage law for fast food restaurants last fall, businesses and their employees have had to adapt. As early as January, before the law even went into effect, headlines were reporting that popular chains and small franchises were having to lay off staff and change menu prices to prepare for the new law to go into effect on April 1.
Governor Newsom is ignoring the concerns of small franchisees and their employees, while cherry-picking specific monthly data to tell Californians and the nation that the $20 minimum wage is a success. It was only a matter of time before the truth was too strong to ignore.
The time has come. A new Institute for Employment Policies investigation A survey of nearly 200 fast-food restaurant operators in California found that most (89%) have already been forced to reduce their employees’ hours or even lay off staff altogether. Of those who have kept their jobs, three-quarters of operators said they have had to limit overtime or the opportunities for employees to work overtime if they wanted it.
As if that wasn’t enough, new jobs in California data Data shows that more than 6,000 jobs have been lost in California’s fast-food sector since January, while the state’s overall employment level is up. Compared to previous years, job growth in the Golden State’s fast-food sector is at its lowest rate since the Great Recession, excluding losses related to the COVID-19 pandemic due to government shutdowns.
The negative consequences of the law also affect consumers, many of whom are employees affected by layoffs and reduced hours. Nearly all restaurant owners said they have already been forced to raise their menu prices in an attempt to survive the April 1 hike. Yet 92% also said they are aware that it could reduce the number of customers in their restaurants.
Recent report from Business Insider find it’s already happening:Fast-food restaurant traffic in California is down.
The responses indicate that these consequences will inevitably continue within the framework of this obligation for higher wages in fast food restaurants.
Even as the damage continues to mount, restaurateurs don’t see a respite coming any time soon. Most estimate the law will cost them at least $100,000 or more each year, triggering future cost-cutting measures.
But instead of acknowledging how disastrous the law has been in just a few months, the Newsom administration is piling on the blame, attacking journalists who are warning about business concerns and federal data showing dire negative impacts. And the unions behind the law are already calling for another wage increase in the sector next January.
That’s why restaurants are starting to look elsewhere to set up shop. Most of them have said they won’t be setting up shop in California in the future, and a majority want to leave the state altogether.
Governor Gavin Newsom has been vocal about the benefits of these measures for all Californians, but business owners on the ground are sounding the alarm about the negative impacts that are already being felt. Governor Newsom is unwilling to face the hard truth: No one wins when businesses move out of state and employees have fewer opportunities to work.
As California convenes its fast food industry council next week, council officials must acknowledge the crisis this law creates. If federal data and national headlines aren’t enough, Newsom and state lawmakers must listen to the small businesses and their employees who say the current policy is hurting California.
Rebekah Paxton is a research director at the Employment Policies Institute.
