New Survey Unveils Fallout from California Gov. Gavin Newsom’s $20 Minimum Wage for Fast Food Workers
California’s fast-food industry is reeling from the consequences of Gov. Gavin Newsom’s $20-an-hour minimum wage law. A recent survey conducted by the Employment Policies Institute reveals that nearly 200 fast-food establishments are grappling with reduced employee hours, closures, and potential relocations out of state.
The survey paints a grim picture: 89% of the fast-food companies surveyed have already cut back on scheduled hours for their employees, even though the law was enacted less than a year ago. Layoffs are becoming a reality for many, a scenario critics foresaw when Newsom signed the bill into law last fall. Concerns from small franchisees and their staff appear to be materializing, contradicting official claims of the law’s success.
One significant finding of the study is that employees who remain on the job have fewer opportunities for overtime and extra shifts, directly impacting their overall earnings. To grasp the full impact of the wage increase, the conservative non-profit surveyed 182 limited-service restaurant operators across California between June and July. This period coincided with new state data showing that over 6,000 fast-food jobs have vanished since January.
A notable casualty of this economic strain is a longstanding Hollywood landmark. In June, the iconic Arby’s Roast Beef on Sunset Boulevard closed after 55 years, signaling the severity of the situation. The closure was announced by 91-year-old Marilyn Leviton, the owner, who cited ongoing struggles exacerbated by the pandemic as a precursor to the final blow dealt by Newsom’s wage policy. “Truth is, I think it was the pandemic that did us in,” Leviton told KTLA. “I really feel we would have closed during the pandemic [if it weren’t] for the federal loans.”
The new minimum wage law has also led to higher menu prices. The study found that 98% of respondents reported raising prices. To cope with the increased labor costs, 70% of surveyed businesses have reduced staff or consolidated positions, and 75% have limited overtime or extra shifts. Previously common practices have become untenable, with 67% of operators estimating the new minimum wage will cost an additional $100,000 per location annually.
Although the survey did not name specific restaurants, major chains like Carl’s Jr., Jack in the Box, and El Pollo Loco are known to have significant presences in the state. Over one in four respondents projected that the law would cost their businesses up to $200,000, and a staggering 93% indicated that they would eventually increase menu prices. Nearly all respondents (99%) foresee price hikes, with 73% anticipating “significant” increases. These price adjustments are expected to deter customer traffic, as 92% of respondents predicted a decline in foot traffic due to higher prices.
Expansion plans within the state are now on hold, with 89% of businesses less likely to grow their California operations. Instead, 59% are contemplating expansion outside of the state to benefit from lower minimum wage requirements elsewhere. Alarmingly, 74% of respondents reported an increased likelihood of shutting down their restaurants, a trend that seems to be gaining momentum.
Recent reports from Business Insider highlight the decrease in customer foot traffic in California’s fast-food sector, underscoring the immediate effects of the wage hike. Despite these challenges, the long-term impacts of the legislation, officially known as AB1228, remain to be seen.
In the meantime, state officials are scheduled to convene a fast-food industry council next week to assess the current state of the industry and discuss potential solutions. As the situation unfolds, the full repercussions of Gov. Newsom‘s wage policy will become increasingly apparent, with both business owners and employees facing an uncertain future.
