Quick Hit:

California fast food restaurants have cut nearly 10,000 jobs due to the state’s $20 minimum wage increase, according to the California Business and Industrial Alliance (CABIA).

Key Details:

• The $20 minimum wage law, effective April 1st, is blamed for significant job cuts and closures of popular fast food chains.
• Major chains like McDonald’s and Burger King have raised prices and reduced employee hours to offset higher wages.
• Critics argue the wage hike harms businesses and consumers, with fast food now considered a "luxury" by many.

Diving Deeper:

California's recent minimum wage hike to $20 per hour has resulted in nearly 10,000 job cuts across the state's fast food sector, according to a major trade group. The California Business and Industrial Alliance (CABIA) criticized Democratic Governor Gavin Newsom for implementing the law, which took effect on April 1. Tom Manzo, president and founder of CABIA, highlighted the adverse impacts on businesses, including closures and increased prices, in an interview with Fox Business.

One notable casualty is Rubio’s California Grill, a popular taco chain that shuttered 48 of its 134 locations in late May, citing the rising cost of doing business in the state. The San Diego-based company filed for bankruptcy shortly afterward. Similarly, a Fosters Freeze location near Fresno closed due to the inability to sustain the upgraded wages.

Fast food giants like McDonald’s, Burger King, and In-N-Out Burger have responded to the wage hike by raising prices. For example, McDonald’s has increased the cost of its Quarter Pounder and Double Quarter Pounder burgers, while Taco Bell raised menu prices by 3%. These price adjustments come amid already high inflation, making fast food meals significantly more expensive for consumers. A LendingTree survey revealed that 78% of consumers now view fast food as a "luxury" purchase.

The new wage law, California Assembly Bill 1287, aimed to provide financial relief to fast food workers in a state known for its high cost of living. However, critics argue that the policy is misguided, asserting that fast food jobs are intended as entry-level positions for young people. Manzo emphasized this point, stating, “It’s a starter industry. You get a job as a kid working in a fast food restaurant and you learn some good work ethic and that takes you into life.”

Despite the intended benefits, the minimum wage hike has introduced significant challenges for the fast food industry in California. With businesses struggling to balance increased labor costs and maintain profitability, the future of many fast food establishments remains uncertain.