San Francisco is one of the wealthiest places on the planet, and is thus able to tolerate higher labor costs and higher minimum wages than most places. But even it is losing some jobs due to California raising the minimum wage for fast food workers from $16 to $20. $20 is too high even for San Francisco.
“A longtime San Francisco McDonald’s has become the latest casualty of California’s new $20 minimum wage,” reports the New York Post:
The McDonald’s at the Stonestown Galleria shopping mall…was permanently shuttered Sunday after more than 30 years serving the area. “This is a gut-wrenching day for my family,” franchise owner Scott Rodrick said…Rodrick blamed the closure on a number of factors — but said the newly rolled-out law hiking the statewide minimum wage from $16 to $20 an hour pushed the business over the edge….
Since the new minimum wage was introduced on April 1, numerous businesses have closed up shop across California. One recent closure included an Arby’s Roast Beef that’s been a fixture on Sunset Boulevard in Hollywood for 55 years, which shut its doors earlier in June. “Food costs have gone way up and the $20-an-hour minimum wage has been the nail in the coffin,” general manager Gary Husch told the Los Angeles Times.
Taco chain Rubio’s Coastal Grill was forced to close dozens of locations across the state in June, only to file for Chapter 11 bankruptcy days later. The fast food chain Fosters Freeze also shuttered a location near Fresno, and directly blamed the new minimum wage for its demise.
In other instances, the cost to raise workers’ pay has been passed directly on to the customer. Chains like McDonald’s, Wendy’s, Burger King, Starbucks and Chipotle have raised their prices by up to 8% in California.
Franchise owners of Pizza Hut and Round Table Pizza laid off around 1,280 delivery drivers this year in preparation for the wage hike, reported the Wall Street Journal.
California lost a higher percentage of fast-food jobs than other jobs recently. The minimum wage hike from $16 to $20 does not apply to non-fast-food jobs. Some California restaurants are turning to automation to avoid rising labor costs, such as El Pollo Loco, which told investors that it would be automating some of its salsa-making.
Fosters Freeze, a chain fast-food restaurant in Lemoore, California, closed on April 1 in response to the minimum wage hike.
“It pains me to think about shutting down stores or laying people off,” said Alexander Johnson, who owns 10 Auntie Anne’s and Cinnabon restaurants in California. Johnson says the wage hike would raise his labor costs by around $470,000, which forced him to trim his staff by about 10 people.
Minimum wage hikes increase consumer prices, as economists have found. An April 2019 survey found that “minimum wage hikes usually mean higher menu prices and fewer employee hours” in restaurants.
Minimum wage hikes can lead to tax increases. In 2016, California’s legislative analyst estimated that the gradual increase in California’s minimum wage to $15 an hour would cost taxpayers $3.6 billion more a year in government pay alone. Easy-to-perform, unskilled jobs in state and local governments historically often paid less than $15 per hour. States had no difficulty hiring people for far less than $15 per hour, because those government jobs were not demanding, and often came with excellent benefits.
