(DailyAnswer.org) – Fast food restaurants in California were culling staff ahead of the new $20-per-hour minimum wage law that came into effect in April. The state increased the minimum wage by 25% on April 1 under the new AB 1228 law, which was signed by Democratic Governor Gavin Newsom in 2023.
Pizza restaurants, in particular, made the difficult decision to cut hundreds of jobs as the wage mandate approached. This has not only affected the businesses but also the livelihoods of many hardworking individuals, who now find themselves without a source of income.
In January 2024, 726,600 people worked in fast-food and limited-service eateries, down 1.3% from September 2023, when the state-backed the minimum wage increase deal. The state’s total private employment declined by 0.2% over the same period.
Wages were at $16 per hour before the mandatory minimum wage increase. Two large franchise operators for Pizza Hut announced they would cull all in-house delivery drivers in favor of delivery services such as Uber Eats and Doordash. Over 1,000 delivery drivers working for Pizza Hut are losing their jobs across the state. The owner of Pizza Hut, Yum Brands, made gross profits of $5.302 billion in 2023, an increase of 4.02% over the previous year.
The U.S. has already seen similar measures taken in response to minimum wage increases in Seattle, which increased the minimum wage to $15 per hour in 2017. In response, the average low-skilled worker in the city lost $1,500 a year as employers reduced working hours. The impending job losses are hitting California as its unemployment rate is the highest in the country. According to the more recent jobs report, the unemployment rate in California reached 5.3% in February 2024.
In November 2023, Chipotle Mexican Grill and McDonald’s announced they would increase their prices to offset the increase in the minimum wage. McDonald’s also increased its prices nationwide by 10% in 2023, and prices at fast food restaurants have increased overall by an average of 30% since 2019.
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