In January of this year, the state of California raised the minimum wage to $16 per hour, but this wasn’t good enough for some union leaders and the politicians they own in Sacramento. The Service Employees International Union (SEIU) has been trying to organize fast food workers but has failed, so they hatched a plan to save their organizing effort.
The SEIU has a strong lobbying presence in Sacramento; in 2023 they spent $2.3 million for what CalMatters, a nonpartisan and nonprofit news organization, says include an “impressive string of wins this year, some of which only surfaced in the past few weeks: Bills to increase the number of guaranteed sick days, raise the minimum wage for health care and fast food workers, allow legislative staff to unionize, and make striking employees eligible for unemployment insurance, a benefit long on labor’s wish list.”
The major chain fast food places carry the logo of many nationwide brands, but they are owned and operated by thousands of small business owners known as “franchisees.” These folks usually own a few locations and employ entry-level workers to serve their customers. Anyone who operates a restaurant of any size knows that the profit margin for these operations is very narrow.
For weeks now, the government propaganda machine has been crowing about the new $20 an hour minimum wage for major brand fast food workers. The folks who would have benefitted from the raise were busy using their calculators to figure out what their new weekly income would be. Of course, they didn’t anticipate how the location owners would react to the new increases in operating costs.
This new mandate was hatched in top secret meetings, which included the SEIU, politicians, and Capitol staffers. Each was required to sign a nondisclosure agreement prior to participating. Public comment was not included during these meetings.
As for the politicians, they gave little thought to the collateral damage this change would cause. Why, because when you raise the entry-level wage, you also must increase other wages, such as cooks’ and managers’, to retain experienced employees. In addition, other food establishments that aren’t part of a national chain must increase wages to keep their employees.
Slow-thinking politicians and a governor who has never had to worry about struggling to meet his monthly expenses for a house or food for his family thought that “big business” would shrug this off and keep on flipping burgers and slicing pizza.
But on April 1, aptly named April Fool’s Day—this year in honor of the politicians who thought this idea up—workers at numerous locations across the state got a shock when they reported for work.
In most cases their hours were cut, thus they really didn’t get a raise in weekly pay at all. In others, staffing was reduced as workers are being replaced by automated ordering systems and/or kitchen appliances. And in other cases, the locations were simply closed, never to reopen again.
For customers, the menu prices were increased to accommodate the increased cost of labor. Many of these locations are in low- to medium-income neighborhoods where folks can ill afford any increase in food costs. Now treating the family to a fast-food outing is going to be out of the question for both the newly enriched fast-food workers and the people they had served.
A conspiracy theorist would think that this was a mean trick played by SEIU leaders to punish an industry that they have had trouble organizing. In the process, all they did was hurt the very people they were trying to “help” because it was these folks who either lost their jobs or had their hours reduced and then had to pay more for a meal if the location stayed open.
Following this increase, the media interviewed several franchise owners; many said that they were either suspending any expansion plans, closing their locations, or were shifting their expansion plans to adjoining states where the business climate is friendlier.
The bottom line here is that the political class, especially of the liberal/progressive mentality, just can’t comprehend how businesses work. First a person must invest large sums of money to open any type of manufacturing or commercial enterprise. Then they must hire and retain qualified employees to make or sell their products.
For this investment, they expect some level of return (aka profit) so they can keep up with technological changes or expand the business and hire more employees. And the employees are paid so they can pay the rent, feed their families, and buy their kids clothes for school.
Another thing the political class doesn’t understand is that businesses don’t have an infinite cash flow. Just because the government mandates an increase in the hourly wage doesn’t mean that companies can absorb those cost increases.
And now national media is reporting that “a fair wage advocacy group is demanding that California’s new $20 minimum wage law for fast food workers be extended to all sectors to help working-class people who are struggling with the state’s high cost of living.”
No one ever gets ahead when the government steps in to help; these actions will only increase the cost of everything you buy. Δ
Ron Fink writes to New Times from Lompoc. Send a letter for publication to letters@newtimesslo.com.
This article appears in Apr 25 – May 5, 2024.
“No one ever gets ahead when the government steps in to help;
these actions will only increase the cost of everything you buy.”
If you don’t know this, It is time you did know.
The bottom line -is that the cost of every expense by a business, a corporation or the government at any level comes out of our pockets.
We, the individuals who earn money, pay with the money we spend, neccessary or not.
Does not matter who, why, what, where or when, only individuals pay.
Government pays with our taxes, corporations pay with our purchases just like any business.
When you and I no longer have any money to buy thiings, the business or corporation fails.
Only gov’t can keep going since it does not ‘sell’ anything and it can, under threat of jail, force us to pay taxes.
“you sit here and cast aspertions on what government can do.”
Design a Ponzi scheme about to collapse around the heads of the next generation either beginning or about to begin collect benefits along side the retirement their jobs provided or assisted them to porvide for themselves.
Meanwhile, many of today’s recipents – who were not offered or encouraged to save for retirement – are totally dependent on an unconstitutional system that lets them barely suvive.
I will continue to cast aspertions on government solutions since they nearly always have unforeseen side effects.
You will learn that to your own regret sooner or later.
What a bunch of crap, both the commentary and comments.
I know all the right wing fear mongering about Cali’s “bad economy” and unemployment, let’s just ignore a Hollywood strike, that was almost 5 months or the Tech’s recent layoff’s hitting Cali hard, lol
Look to Seatle’s min wage increase in 2014, guess what happened? Yep less hours for low wage workers BUT more take home pay for those workers. And the hours cut were about 6% total.
If a Biz can’t afford extra costs (MIN WAGE INCREASE IS NO DIFFERENT than insurance, PGE, Water, RENT, etc ) maybe they shouldn’t be in business to begin with?
As far as the libertarian garbage spewed, I understand how ignorant you are as there has NEVER been a state or nation to ever be close to your paradise.
As far as “ponzi” schemes and saving for the future? Yeah Social Security keeps nearly 50% of seniors out of poverty, I’m sorry your not honest WHY it (and Medicare) were created. Want an easy fix? Lift the cap off of it. Saved forever.
PROGRESSSIVE POLICIES CREATED THE WORLDS LARGEST MIDDLE CLASS, RIGHT WING ECONOMICS HAS SHRUNK IT BY 20% THE PAST 40+ YEARS!
Most fast food restaurants in California had already baked in the cost of a minimum wage to their prices. To what end?
McDonald’s reports sales increases of 3-4%, which is in line with historical averages, although down a bit from the double digit increases they experienced during the pandemic.
Analysts guess that about 1-3% of fast food jobs will be eliminated with the new wage. On the other hand, the purchasing power of the remaining workers will continue to bolster the U.S. economy, which continues to grow at a robust rate, despite persistent inflation above 3% (which, by the way, is the lowest inflation rate of any first world nation).
Q3 and Q4 of last year saw above 4% growth despite impending news of minimum wage increases. In fact, during those quarters wages grew faster than inflation. The persistent doom and gloom we hear from the right doesn’t really correspond to the facts. Just ask the investors on Wall Street who are experiencing a very lucrative bull market right now.
But in a post-factual era, serial commentators such as Ron Fink can sound like experts when they really have no idea what they’re talking about.
PREDICTION: 1.) Prices will rise 2.) Business will drop, as poorer customers can not longer afford five $16 Happy Meals ($80) for their families, and richer customers think “I really shouldn’t be eating this crap, anyway” 3.) Lots of fast food restaurants will close 4.) Workers will lose their jobs, while liberals bask in smugness over having helped workers.
@Shanti Harris: So fast food gives you tuberculosis? Yikes! But I am sure that the unemployed fast food workers will be grateful for your “help”.
This article traffics in a number of recycled talking points about wage increases that have been largely discredited by recent economic research. As the Economic Policy Institute summarizes: “The last decade has seen a wealth of rigorous academic research on the effect of minimum wage increases on employment, with the weight of evidence showing that previous, modest increases in the minimum wage had little or no negative effects on the employment of low-wage workers.” Further, extensive research conducted by the UC-Berkeley Labor Center found that “significant increases in the minimum wage have little, if any, impact on employers’ hiring decisions.”
The article mentions workers being replaced by automated ordering systems, but many of these decisions (at Jack in the Box, for example) were made years before the wage increase took effect, according to Forbes. Many of these companies turned to automation because they couldn’t find workers willing to work for such low pay, which is a pretty strong argument for a wage hike. At Pizza Hut, the decision to eliminate delivery drivers was blamed on the $20 wage increase, but these decisions were actually made in 2022 as a result of labor shortages, years before the wage hike.
As for the author’s claim about price increases, it is true that a number of national chains have recently announced price increases, but it is very likely that these enormously profitable fast-food companies are using the wage hike as mere pretense to raise prices. Recent research supports this theory. As economists at the Roosevelt Institute indicate, “analysis of financial data for the past decade … suggests that affected employers can absorb the increased operating costs associated with a higher industry minimum wage without increasing consumer prices or reducing employment.”
I gather that the author of this piece is not a fan of government welfare programs. If that’s the case, he should support the wage hike, given that full-time fast-food employees rely on government programs at double the rate of other workers, which costs taxpayers $7 billion a year, according to the UC-Berkeley Labor Center.
The author argues that “when you raise the entry-level wage, you also must increase other wages, such as cooks’ and managers’, to retain experienced employees. In addition, other food establishments that aren’t part of a national chain must increase wages to keep their employees.” This is an excellent argument for the wage hike, although I don’t think that’s what he intended when he decided to include this paragraph.
I think the author and I would agree that it’s unfortunate that these franchisees rely on such small profit margins, but the enemy isn’t intrusive government, labor unions, or “the political class” (whatever that means). The enemy is a franchise/franchisee model that exploits workers and small business owners, marks up prices to egregious levels, and tricks the public into believing that it’s all the fault of “government.”