A rise in the minimum wage sounds like the start to a positive story but the recent California food chain layoffs suggest it could have less than favorable implications for a while. Earlier this year, 22 states signed legislation in regard to increasing the minimum wage and most agreed to push the wage above $16 USD, which was a big win for workers struggling to make a living. Seeing room for further negotiations, labor unions rose in protest, asking for better wages for its workers, hoping for the minimum wage rate in California to be increased to $22 USD. This demand was firmly rejected but the Fast Act was signed after significant debate, increasing the wage by $4 to land at $20 USD.
In order to avoid the additional costs, the number of Californian food chains’ layoffs has begun to grow. The impact of the California minimum wage law has been unfavorable so far and it’s unclear how long we could expect these effects to continue.
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California Food Chains Layoffs: Unintended Consequence of Rising Minimum Wage Rates
No one wants to hear about layoffs but the unfortunate truth is that no matter where you look, the trend seems to have found a way to replicate itself in the industry. In 2023, Gov. Gavin Newson signed the Fast Food Accountability and Standards Recovery Act (FAST Act) to guide fast food chains to increase the minimum wage to $20 to provide workers with a better chance of supporting themselves and improving their overall quality of life. The legal requirement goes into force on April 1, 2024, and applies to fast-food chains with more than 60 locations nationwide. This ensures it applies to companies more capable of supporting the additional expense.
Instead of conforming to the new regulations, businesses have begun eliminating these minimum wage jobs themselves. California’s minimum wage job terminations have already begun, with popular fast food chains firing existing employees to mitigate the costs of retaining their remaining employees. According to USA Today, Pizza Hut announced cuts of more than 1,200 jobs. Some branches have also opted to discontinue delivery services so they don’t have to fund the delivery roles. You should still be able to have food from these outlets delivered to your location, but this will likely happen through third-party providers rather than their delivery staff keeping up with their routes. There may be greater demand for delivery drivers at third-party businesses that offer such services, so we may be looking at a reorganization of resources rather than a dead end for everyone losing their jobs.
As per The Wall Street Journal, the California minimum wage job cuts will lead Round Table Pizza to lay off about 1,280 delivery workers while Excalibur Pizza will cut 73 driver jobs. The California food chains’ layoffs have seen a disproportionate number of job cuts coming for pizza stores. This could be due to these outlets employing a larger number of delivery workers rather than having the service outsourced. It is perhaps easier to execute job cuts in this area rather than starting with serving staff or cooks.
Impact of The California Minimum Wage Law
Employees who may have been looking forward to earning more for the hours of relentless work they put in, now have to look for new jobs because their existing ones have just made their service redundant. Those who do not fall victim to the California minimum wage job terminations will still reap the benefits of an improved wage rate at the least. While well-intentioned, the negative consequences will hit many workers, and finding another similar job in the same industry may also be difficult considering most fast food chains will enforce a hiring freeze for a while at least.
The impact of the California minimum wage law will take a few months at least to level out and until then, workers will have to gear up to find another position or make use of the temporary unemployment benefits to weather the storm if things come down to it. After the initial few months, if the costs to the companies participating in California’s food chain layoffs are still high, then consumers might find some of the costs being passed on to them as well. This might affect sales numbers again but there’s no way to predict how the market is going to change. Pizza chain Domino’s has confirmed a rise in its menu prices as a result of the wage hike.
Fast food jobs were a temporary source of employment back in the day, with students and young workers using it as a springboard to jumpstart careers or earn a few quick bucks. Unfortunately, with the market where it is today and the complexities behind getting a new job, many workers with families are forced to take up any work they can find and these jobs at fast food chains are the most accessible to them. Having a decent minimum wage is more important now than ever before.
The impact of California’s minimum wage law will probably take a few months of discomfort to pan out fully, but the end results, backed by happier workers able to afford basic necessities, should be worth it.