California's law regulating fast food wages will destroy jobs
The California Legislature passed, and Governor Gavin Newsom signed, a new bill regulating the fast food industry. It's a targeted bill that, instead of setting a statewide minimum, sets a fast food industry minimum wage, and it's a big one: almost $7 higher than the regular state minimum wage. Leftists think they're giving a gift to workers. Sane people know that, during a recession, they're either (a) destroying jobs or (b) driving the fast food industry out of California, or maybe both.
The New York Times has the story (syndicated at the Marin IJ):
California will enact a sweeping new approach to regulating fast-food restaurants after Gov. Gavin Newsom said Monday that he had signed a bill to effectively set a minimum wage in the industry and to create new safety and anti-discrimination rules.
Amid resistance from fast-food companies, the state Legislature last week approved the bill, which will set up a 10-member council composed of representatives from labor and employers to oversee the industry's labor practices in California.
The council can raise the industry minimum as high as $22 an hour next year, versus a $15.50 minimum for the rest of the state, after which the minimum will be adjusted for inflation. The council can also issue new labor standards.
The article gives the usual two sides: industry groups claim that it will raise prices beyond what customers are willing to pay, destroying franchises along the way. Labor activists charge that it will protect the "vulnerable worker population." Regarding that last, for decades, low-end fast food jobs haven't been careers. Instead, they are starter jobs for young people and new immigrants who either rise in the ranks within a fast food chain or, with the experience they've gained working the register or the grill at a fast food restaurant, go on to better jobs.
Image: Food service robot. YouTube screen grab.
Yes, there is a sector of people who remain in low-end fast-food jobs forever. For reasons I won't explain, I know some of these people, and the ones I know have a few commonalities: they use drugs, they routinely fight with managers and always end up quitting, and they never learn the habits of stable work (punctuality, reliability, politeness, etc.). Maybe that's just the people I know, or maybe that's consistent with what others have seen when it comes to "permanent" fast food workers.
What about the economics? I think I'll let the New York Times, circa 1987, explain. It published this famous editorial on January 14, 1987, when Teddy Kennedy took over the Senate Labor Committee and organized labor was pushing to increase the federal minimum wage from $3.35 per hour to something higher. The Times opposed that initiative (reminding all of us that it was once a left-leaning but still sane newspaper):
Anyone working in America surely deserves a better living standard than can be managed on $3.35 an hour. But there's a virtual consensus among economists that the minimum wage is an idea whose time has passed. Raising the minimum wage by a substantial amount would price working poor people out of the job market. A far better way to help them would be to subsidize their wages or — better yet — help them acquire the skills needed to earn more on their own.
An increase in the minimum wage to, say, $4.35 would restore the purchasing power of bottom-tier wages. It would also permit a minimum-wage breadwinner to earn almost enough to keep a family of three above the official poverty line. There are catches, however. It would increase employers' incentives to evade the law, expanding the underground economy. More important, it would increase unemployment: Raise the legal minimum price of labor above the productivity of the least skilled workers and fewer will be hired.
Ignore the bit about subsidizing wages, which is just welfare. Pay attention to the point about job destruction. Since 1987, computers and robots have taken quantum leaps. More and more fast food outlets have self-serve kiosks, doing away with clerks. Even food preparation is becoming a job for which humans need not apply:
Sure, Flippy got "fired" for leaving his human co-workers in the dust, but we know that problem will be solved.
In the meantime, fast food outlets will quickly discover that they must raise prices or fire workers to stay in business. If they raise prices, they lose customers who go to fast food outlets for cheap food. If they fire workers, they lose customers who go to fast food outlets for fast food. Franchises and franchisees will soon have no alternative but to pull out of California, taking their entry-level jobs with them.
California proves that the road to hell is paved with manifestly stupid intentions masquerading as good ones.