In 2023, California Governor Gavin Newsom heralded the Fair and Fast Recovery Act, setting a $20 minimum wage for fast-food workers, as a historic triumph for labor, business owners, and consumers alike. However, two years into the law's enactment, the state grapples with unintended consequences, including job losses, business closures, and inflationary pressures on the cost of living.
According to the Employment Policies Institute (EPI), California has seen a reduction of nearly 20,000 fast-food jobs since the law's implementation, a significant portion of the sector's nationwide employment downturn. This stark figure has sparked a debate over the economic foresight of such wage mandates.
On the ground, the effects are palpable. Pizza Hut franchisees, faced with surging labor costs, have laid off over 1,200 delivery drivers. Other chains, including Mod Pizza and Foster’s Freeze, have shuttered California locations, as reported by Conservative Brief. Rebekah Paxton, research director at EPI, criticized the policy's outcome, stating, "Newsom’s $20 wage has turned out to be nothing more than a boost to his own ego at the expense of fast-food workers."
The workers who have retained their jobs have not been immune to the law's impact. EPI estimates a reduction of 250 hours per year for non-tipped employees, equating to a loss of approximately $4,000 in annual earnings under the previous wage structure.
In response to the wage hike, the fast-food industry is increasingly turning to automation. Kiosks and self-ordering systems are becoming more common as franchise owners seek to offset higher payroll expenses, often at the cost of part-time jobs.
Consumers, too, feel the pinch. A study by Datassential reveals a 13% increase in fast-food prices in California post-April 2024, nearly double the inflation seen in the rest of the United States. This price surge adds to the financial strain on families already grappling with broader inflationary trends.
The American Cornerstone Institute has voiced concerns that the wage mandate disproportionately affects small businesses, which cannot absorb the increased costs as readily as larger corporations. For many local franchisees, the choices have become stark: reduce staff or cease operations.
Despite these challenges, supporters of the wage hike point to a UC-Berkeley study that found the increase did not lead to job losses and only modestly affected prices, rising by about 2%. However, this analysis is contested by business groups that argue the study fails to account for the full spectrum of economic disruptions now evident across the state.
As the fallout from the wage law unfolds, the political stakes for Governor Newsom are high. Once considered a potential presidential candidate, he now confronts growing scrutiny over a policy that critics label a national cautionary tale. The reality for Californians is clear: job reductions, diminished working hours, closed businesses, and rising costs. The legislation once lauded as a step forward is now, in the eyes of many affected workers, a self-inflicted setback.
