California’s new $20 minimum wage law has led to the loss of nearly 10,000 jobs in the state’s quick service restaurant (QSR) industry. This figure, reported by Fox 5 News, originates from the Hoover Institution, a public policy think tank at Stanford University.
The California Business and Industrial Alliance (CABIA) has expressed strong disapproval of Governor Gavin Newsom’s support for the law, which came into effect on April 1, 2024. The law mandates that restaurant chains with 60 or more locations nationwide increase their hourly wages from $16.21 to $20.
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In response to the wage hike, major chains such as McDonald’s, Burger King, and In-N-Out Burger have raised their prices to offset increased labor costs. Additionally, many restaurants have reduced employee hours and accelerated the automation of various tasks.
Specifically, Pizza Hut and Round Table Pizza, which collectively operate around 400 locations primarily on the West Coast, plan to lay off 1,280 delivery drivers in 2024.
CABIA president and founder Tom Manzo criticized the law, stating that California businesses have faced significant challenges for years. According to Manzo, the new minimum wage law exacerbates these difficulties, leaving businesses in a precarious situation.
“Government entities don’t have to operate under the same constraints as private businesses when they run out of money,” Manzo commented. He argued that the belief that substantial wage increases would benefit workers or businesses is misguided, saying, “Leaders who think this way are living in a fantasy. Prices can only rise so much; a Big Mac won’t cost $20. It’s not feasible.”
In an effort to mitigate the financial strain caused by the increased labor costs, companies like Navia Robotics and Nuwa Robotics are offering AI-based robotic solutions to help businesses streamline operations.
This article, originally titled “QSRs cut 10,000 jobs because of California’s $20 minimum wage law,” was first published by Verdict Food Service, a brand owned by GlobalData.
