California Governor Gavin Newsom’s $20 minimum wage law, which took effect on April 1, has forced fast food chains in the state to raise prices and cut jobs to survive the costly wage increase. According to Tom Manzo, president and founder of the California Business and Industrial Alliance, nearly 10,000 people in the restaurant industry have lost their jobs since the law took effect.
Manzo criticized state lawmakers for living in a “fantasy land” when they believed that minimum wage increases would help workers and businesses, stating, “California businesses have been under total attack and total assault for years. It’s just another law that puts businesses in further jeopardy.”
Popular fast food chains, such as McDonald’s, Burger King, and In-N-Out Burger, have had to raise prices to make up for the increased labor costs. Many were forced to reduce employee hours, and some even transitioned to automation. Manzo pointed out that fast food is meant to be a “starter industry” for young workers to learn good work ethic, not a long-term, high-paying job.
The first major chain to be affected by the new regulation was Rubio’s California Grill, which closed 48 of its approximately 134 locations just one month after the law took effect and filed for bankruptcy on Wednesday. Fosters Freeze, another fast food chain, also closed its Fresno location due to financial difficulties related to paying employees higher wages.
According to recent reports, Taco Bell raised menu prices by 3 percent, and Starbucks added 50 cents to every menu item since the law took effect. A recent Lending Tree survey found that 78 percent of consumers now view fast food as “luxury” purchases due to the increased prices.
