Take out restaurant workers scramble to complete the order. (Photo: James Kirkikis, Shutterstock)
California’s Bad April Fools Joke: $20 Minimum Wage For Flipping Burgers
Cheap fast food will no longer be cheap
By Katy Grimes, April 5, 2024 10:57 am
California Governor Gavin Newsom didn’t learn anything from PaneraGate. When his long time friend billionaire Greg Flynn called him to complain that the $20 minimum wage would hurt his fast food franchises, instead of working to overturn the new minimum wage, Gov. Newsom offered him an exemption from the law.
Flynn owns more than two dozen Panera Bread locations in California, as well as Applebee’s, Pizza Hut, Taco Bell, and Wendy’s.
It’s obvious that Newsom’s B.S. in Political Science is serving him well – he’s mastered B.S.
Newsom should have majored in Economics.
Under Newsom’s “leadership,” California is falling from the 4th largest economy (his claim) in the world to the 6th. If he tries to blame Covid for this dive as so many governors have, he will be reminded that he locked down the state’s businesses and manufacturing, schools and universities for nearly three years.
Fox reports California currently ranks as the 5th largest economy in the world.
“The California Business Roundtable is now projecting the state will drop below India for the world’s sixth largest economy later this year,” KRSO reports. “California has seen a drop in revenue the last two years, with a weakening tech sector and the highest unemployment rate in the country.”
A quick Econ 101 lesson is needed.
The Wall Street Journal reported:
California had 726,600 people working in fast-food and other limited-service eateries in January, down 1.3% from last September, when the state backed a deal for the increased wages. Total private employment in the state declined 0.2% over that period, according to state figures.
Economists have long debated minimum-wage increases’ effect on employment. A study by the nonpartisan Congressional Budget Office last December found that raising the federal minimum wage to $17 an hour from $7.25 by July 2029 could increase wages for more than 18 million people, but also could reduce employment by about 700,000 workers.
Higher wages mean higher costs for consumers. And that’s the real rub – cheap fast food will no longer be cheap.
Many consumers will choose to eat at Denny’s, which does not have to pay the $20 per hour wage. The Grand Slam breakfast will be cheaper than a Sausage McMuffin – an you are served at a table with a bottomless cup of coffee.
I worry about making that comparison because we know how leftist politics work – the fast food $20 minimum wage is the camel’s nose under the tent. Gavin Newsom and the state’s Democrat politicians will come for the entire restaurant industry.
Notably, the federal minimum wage is still $7.25 per hour.
Economist Milton Friedman frequently spoke against the minimum wage. When Congress increased the minimum wage in the 1960’s, Friedman said “Congress has just acted to increase unemployment.”
He continued:
“Does a merchant increase his sales by raising prices? Does higher pay of domestic servants induce more housewives to hire help? The situation is no different for other employers. The higher wage rate decreed by Congress for low-paid workers will raise the cost of the goods that these workers produce—and must discourage sales. It will also induce employers to replace such workers with other workers—either to do the same work or to produce machinery to do the same work or to produce machinery to do the work.”
Gov. Newsom may not be an economist, but surely he knows this.
Does he care? No.
Caught red-handed offering the $20 minimum wage exemption to his BFF, Newsom just signed AB 610 into law to clean up the original $20 minimum wage bill, as well as soften the blow for certain fast food establishments. AB 610 now exempts fast food restaurants located in the very locations which could most afford the $20 minimum wage increase because of how much more they charge: at casinos, airports, hotels, event centers, theme parks, museums, corporate campus cafeterias, and publicly owned lands including ports, piers, beaches and parks concessions.
Only the mom and pop and family-owned fast food restaurants will be paying the $20 per hour minimum wage – a “living wage.”
Friedman warned:
“The groups that will be hurt the most are the low-paid and the unskilled.”
“The loss to the unskilled workers will not be offset by gains to others. Smaller total employment will result in a smaller total output. Hence the community as a whole will be worse off.”
Friedman reminded us that fast food jobs don’t require much training, and used to be a traditional training ground for the unskilled. But not any longer thanks to the minimum wage laws. And every increase in the minimum wage hurts the low paid and the unskilled the most.
Any economist could have predicted, and Milton Friedman warned us so many years ago, fast food businesses are going to have to downsize their workforce, reduce employee hours, raise prices and automate more… all because Gavin Newsom and California’s Democrat lawmakers meddle in the private sector.
As Friedman famously said, “The rise in the legal minimum-wage rate is a monument to the power of superficial thinking.”
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“Newsom should have majored in Economics.”
I don’t think that Newsom would have made it through a real economics program. Too hard. He picked the easiest route for his degree.
It’s obvious he wouldn’t have made it through an economics program; He can’t balance a budget, he doesn’t know how to pay for a train. I doubt he can balance a checkbook or an accountant’s ledger.
No kidding, Raymond, apparently that “easiest route” was by having his degree handed to him without his having to do any real work whatsoever. His dyslexia, you know. (Cue the violins)
P.S. Great line from Katy Grimes, by the way:
“It’s obvious that Newsom’s B.S. in Political Science is serving him well – he’s mastered B.S.”
That’s for sure! Actually the whole article was pretty delicious, and bonus points for including Milton Friedman, which we should all be including in our diets until we get it straight and it becomes a full and permanent part of our political/economic thinking.
Gavin Newsom and legislature need to DUMP this entire mess, and the sooner the better. Unfortunately they like economic destruction and devastation, but only for us, of course, so we’re not holding our breath, are we?
To pay $20 an hour plus all the labor burden probably costs well above $30 an hour for the business. In order to pay this wage and cover rent, food costs, utilities etc. plus make a small profit the burger flipper must produce several hundred dollars in sales each hour. If not they are costing the business money rather than pulling their own weight.
Perhaps a burger business man can lay it all out in dollars and cents for the economic illiterate?
Love it. YES.
P.S. And as Katy Grimes pointed out, sales are going to go DOWN, not UP (as customers begin to drop out of the fast food world because of its unaffordability for most). So we can forget about several hundred dollars in sales per hour per employee, can’t we.
If the fast food industry were to follow the In-N-Out business model they might be able to save their butts. In-N-Out already pays employees more than $20 an hour for burger flippers et al and I think managers can make six figures. Plus there are other benefits and perks. But the company owns all of the outlets, so say goodbye to separately owned franchises like McDonald’s, etc. And, putting aside that this sort of transition would take time and cost money, a practical response such as this does not change the fact that the state’s MANDATE and MICROMANAGEMENT of private business in this way remains what is WRONG and DESTRUCTIVE about it.
I can eat out at a sit down restaurant for the same money (or less) and get much better food and be served everything while I enjoy my meal.
Yes, CW. I just cook just about everything at home these days but I look around and few others seem to be doing that, only ordering take-out delivered and that sort of thing. So a lot of people and families who don’t want to cook or prepare their own meals are going to be hit really hard with huge and probably unexpected expenses.
Remember when Newsom had bragging rights to running a state that WAS the 5th largest world economy? Now what will he say?
India will surpass California.
[The California Business Roundtable is now projecting the state will drop below India for the world’s sixth largest economy later this year,” KRSO reports. “California has seen a drop in revenue the last two years, with a weakening tech sector and the highest unemployment rate in the country.”]
Newsom and cronies sure know how to ruin a state’s thriving economy! How will that play into his future presidential aspirations?
Stick a fork in California it is done! Newsom holds the bloody knife that killed this state’s “rebound” economy with the thousand cuts approach to small businesses, the backbone of America. The central valley and small rural areas with a fast food option will be forced to close or raise prices to the point they will loose sales!
High inflation + forced increased minimum wage = job loss
Bad policy ALWAYS hurts the little guy/gal.
https://kmph.com/news/local/fast-food-workers-blindsided-by-sudden-closure-of-fosters-freeze-in-lemoore
*lose sales
I need an editor.☺️😡
Yes, Cali Girl, the very people these Dem/Marxist phonies claim to “care” so much about are ones who always get the shaft —- and this is not the only example of it. As you well know…
It is hard to witness, Show😔
I know. Sigh!
At $20/hour, there are going to be a lot more applicants for those positions from other businesses that pay less. Forget high school students, retired people, handicapped people, and lower performers. Only the best workers will be hired thus forcing many less competent workers into the unemployment line.
https://www.ziprecruiter.com/c/PlumpJack-Cafe/Job/Busser/-in-Olympic-Valley,CA?jid=1bb1579ca2fa0590
Haha
Newsom pays employees $16 per hour at Plump Jack.
Hypocrisy much?
There will be a ripple effect beyond burger flippers.
Every minimum wage earner thinks they can quit their $10 an hour job and be a “Doctor of Hamburger Flipping”. Newsom put every industry in California in the bullseye.
Let us not forget: the origin of the problem was immigrants displacing high school kids in their first jobs. Adults do more and need more. And more. And more… Teenagers move on to “real jobs” which are fleeing California at a record rate.
I predict most of the industry will collapse into “to go” only. The industry will be consolidated by automation until a natural equilibrium is reached: One owner opening the door for an independent contractor replenishing the robots food supplies and another independent contractor managing the cleaning systems, and the owner handing out bags of “soylent green” (j/k) .
Fast food will ultimately be reduced to serving a civilian version of a military MRE.
There will never again be an air conditioned refuge for a road weary mom and dad to shut the kids up with a Happy Meal!
Raising the minimum wage has nothing to do with economics, it is 100% politics. It is to get votes.
Absolutely –
YES you are so right
I find it interesting that this new $20 minimum wage law, doesn’t affect the four restaurants Gavin Newson owns.
No kidding. “Rules for thee but not for me.” Which is CLASSIC Gavin Newsom. Gel-head horse’s ass.
Prices have already gone up from inflation for the cost of ingredients and other operatiing costs. The actual human employee is told their value must remain the same and not ‘inflate’. Doesn’t this seem like a weird unreasonable situation? The price of burger patties goes up and the system kind of shrugs like “What can ya do?” or just grumbles. The cost of the human employee going up is an outrage though. Just kind of sad.
‘
California Insider – “Famous Chef Explains Why It Is Hard To Operate A Restaurant In California” https://www.youtube.com/watch?v=tiT0uLGj3g8
Gee, I wonder if you all can guess why it is hard to operate a restaurant in California.
Chef Andrew Gruel’s account of the morass is STUNNING.
As with all things “democrat’, their main focus is on obtaining and welding government largesse. This is but a small example, while the state continues hemorrhaging businesses and citizens.
Speaking of, 1Offgrid…… this was sort of a “last straw” for me when I saw it this morning:
“California is Giving up to $150,000.00 to First-Time Homebuyers with ‘Dream for All'”
https://ktla.com/news/california/california-is-giving-150000-to-help-homebuyers/
1. The state could take action with a thousand other things — e.g. cutting regulations, etc., — to fix skyrocketing costs, before rolling out this vote-buying program; and
2. Through “obtaining and wielding government largesse,” as you so rightly said, this sort of thing is naked vote-buying in the category of “fake help” that ends up actually assisting NO ONE, or only a token handful, and is the very last thing you would expect a state that is $80 BILLION in the hole to do. For crying out loud.
GAH!