and (for) the thousands of other fast-food workers put out of work by California’s law, it’s already too late. And these job losses reveal the truth of economist Thomas Sowell’s famous adage: The real minimum wage is $0.
For eight years, Michael Ojeda delivered food for a Pizza Hut in Ontario, California, using the income he received to support his family.
In December, the 29-year-old received a letter from the pizza franchise informing him that his employment was being terminated in February. The news shook him.
“Pizza Hut was my career for nearly a decade and with little to no notice it was taken away,” Ojeda said, whose story was recently highlighted by the Wall Street Journal.
Ojeda appears to be just one of the thousands of casualties of a new California law that will raise the minimum wage for fast-food workers to $20 an hour on April 1 for all restaurant chains that have at least 60 locations nationally.
Making $20 instead of $15 sounds like a win, but economics shows there’s no such thing as a free lunch. California lawmakers just proved it.
When the minimum wage goes up, the money to pay workers must come from somewhere, and it typically comes from three places: higher consumer prices, reduced labor costs in other areas (fewer workers, fewer hours, reduced benefits, etc.), and lower profits and capital expenditures.
Many minimum wage proponents want to focus just on that last item (profits) and ignore the other adverse consequences of the policy. But events unfolding in California show this is a mistake.
Restaurant franchises such as Chipotle, Jack in the Box, and McDonald’s have already announced they’ll be jacking up prices to cover increased labor costs, which are expected to increase by roughly $250,000 per location for many of these restaurants (though the economics here is nuanced).
But raising menu prices isn’t the only way California restaurants are responding. Records submitted to the state show Pizza Hut and Round Table Pizza plan to sack nearly 1,300 delivery drivers. Other chains are taking similar actions, and many restaurants have stopped hiring new workers.
This is not unexpected. Critics of the law predicted it would result in less employment, and that’s exactly what has happened.
https://fee.org/articles/the-results-of-californias-new-20-fast-food-minimum-wage-are-already-in/
