California's Upcoming Minimum Wage Hike Threatens Hundreds of Thousands of Jobs and Businesses
Written by: A. Hamilton
April 1st marks the implementation of California's new law setting minimum wages for fast-food workers, but the rollout of this measure has been far from smooth. Critics argue that the effort has been marred by bad policy design, lack of accountability, conflicts of interest, and political ineptitude.
Governor Gavin Newsom, the driving force behind the initiative, remains unfazed by the concerns raised. However, many are questioning the leadership and decision-making that led to this bewildering measure.
The new law raises the state's minimum wage for fast-food workers employed by chains operating more than 60 outlets nationally from $16 an hour to $20.
What remains unclear is why fast-food workers are being prioritized over other low-paid workers and why those working at smaller operations are not receiving the same support. These puzzling discrepancies raise doubts about the fairness and effectiveness of the policy.
Bloomberg News recently reported that fast-food outlets belonging to big national chains would be exempt from the wage increase if they bake bread on the premises. This exemption has raised eyebrows, especially considering that a major franchisee of one of these chains, Panera Bread, had previous business ties with Governor Newsom and contributed to his political campaigns.
The potential conflicts of interest are concerning and raise questions about the impartiality of the decision-making process.
The Wall Street Journal has documented instances where fast-food outlets across California have already begun downsizing their workforce. Some employees have received notices of termination months in advance, causing significant distress. For example, Michael Ojeda, a Pizza Hut driver from Ontario, California, expressed his dismay at losing his job, which he had held for nearly a decade, due to abrupt changes in staffing.
One significant consequence of the wage hike is the discontinuation of delivery services by several Pizza Hut franchises in California.
Last year, multiple franchises filed notices under the Worker Adjustment and Retraining Notification Act, signaling the end of their delivery operations. This decision has directly impacted hundreds of delivery drivers across the state, leaving them without employment.
Similarly, Round Table Pizza, based in Menlo Park, California, has announced plans to lay off approximately 1,280 delivery drivers in response to the impending wage increase, according to USA Today. The company cites rising operating costs as the primary reason for transferring delivery services to third-party providers. While Round Table Pizza's parent company, FAT Brands, views this as a transfer of jobs, it acknowledges the potential for increased delivery fees and consumer prices.
The repercussions of the minimum wage hike extend beyond traditional fast-food chains.
Brian Hom, owner of Vitality Bowls restaurants in San Jose, highlighted the challenges of maintaining profitability amid rising labor costs. With a reduced workforce, Hom now faces longer wait times for customers and the necessity to raise prices to offset additional expenses, according to Bloomberg.
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Critics of the wage increase argue that it places undue strain on businesses already grappling with economic hardships, particularly in light of the COVID-19 pandemic. California Assembly Republican leader James Gallagher warns of the detrimental impact on the state's employment landscape, pointing to rising unemployment rates exacerbated by the new mandate.
Supporters of the wage hike, however, contend that it addresses income inequality and provides essential financial support to low-wage workers. They challenge the notion that fast-food employees are predominantly teenagers seeking temporary employment, emphasizing the importance of these jobs for many adults struggling to make ends meet.
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