Minimum Wage Laws Make for Great Politics, but Fewer Jobs
Once again, for those who didn’t pay attention during Econ 101, if you artificially hike the price of labor, you reduce demand for workers. In California, this is playing out in terms of lost jobs, increased automation, and other consequences that result when politicians signal a unicorns-and-rainbows vision of the marketplace to their allies and leave the public to deal with the resulting mess.
Higher Pay, but Fewer Jobs
“A California state law is set to raise fast-food workers’ wages in April to $20 an hour. Some restaurants there are already laying off staff and reducing hours for workers as they try to cut costs,” Heather Haddon reported for The Wall Street Journal. “California restaurants, particularly pizza joints, have outlined plans to cut hundreds of jobs in the months leading up to the April 1 wage mandate, according to state records. Other operators said they have halted hiring or are scaling back workers’ hours.”
This comes after California Pizza Hut franchisees laid off over 1,200 delivery drivers in anticipation of the minimum wage hike. It comes in the wake of McDonald’s and Chipotle Mexican Grill announcing higher menu prices to accommodate labor costs; those higher prices can be expected to drive away some customers, resulting in less need for workers to service lower demand.
“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,” Haddon added. “Total private employment in the state declined 0.2% over that period, according to state figures.”
Of course, less customer traffic isn’t the only way to reduce staffing needs; you can also replace people with technology. Chipotle announced plans to use robots to assemble burrito bowls. El Pollo Loco is doing the same for making salsa. Other restaurants are adopting automated fryers and burger-flippers to reduce the costs of employees.
“In a state where the minimum wage for fast food workers will soon be $20 an hour, having less people to pay can be a bonus for businesses,” Joy Benedict and Kerry Breen noted in January for CBS News.
That point should have been clear to everybody when California Gov. Gavin Newsom signed the minimum wage hike into law last September, but he insisted the intention of the legislation was to put money into worker’s pockets, not to force them out on the street.
“California is home to more than 500,000 fast-food workers who – for decades – have been fighting for higher wages and better working conditions,” Newsom said at the time. “Today, we take one step closer to fairer wages, safer and healthier working conditions, and better training by giving
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