California Dreamin' Of Empty Wallets: Does $20 Minimum Wage Spell Doom?

By Jennifer Wentworth | Thursday, 04 April 2024 09:20 PM
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The economic implications of California's new minimum wage law are becoming increasingly apparent to its residents.

The law, which came into effect on Monday, has established a minimum wage of $20 per hour for fast-food workers. This has led to a surge in prices at many restaurant chains across the state, as reported by the New York Post.

The law is applicable to restaurants that offer limited or no table service and are part of a national chain with at least 60 establishments nationwide, according to the Post. The previous minimum wage for these restaurants was $16 per hour. The $4 increase has prompted several chains to hike their menu prices to offset the additional wage costs.

For instance, the Texas Double Whopper meal at Burger King saw a price rise from $15.09 on March 29 to $16.89 by April 1. Other items on the menu have also seen increases ranging from 25 cents to $1. In-N-Out Burger has raised the prices of burgers by 25 cents and soft drinks by a nickel. Hart House, owned by actor and comedian Kevin Hart, has increased the prices of all milkshakes by a dollar, sandwiches by 50 cents, and large fries by $1.10, from $4.49 to $5.99.

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While chains like Chick-fil-A, McDonald’s, and Wendy’s have not yet increased their prices, it is reasonable to anticipate that they will follow suit.

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California's Democratic Governor, Gavin Newsom, lauded the wage increase at a news conference, stating, “This is a big deal. … Eighty percent of the workforce are people of color, two-thirds are women, the majority are breadwinners. And we have the opportunity to reward that contribution. Reward that sacrifice”.

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However, this wage increase is not necessarily a reward. While it may seem beneficial to receive higher pay, the subsequent increase in menu prices is just the beginning of the economic repercussions.

The question arises: why would chains like Burger King or In-N-Out maintain their current workforce size? The cost of an hour's work for two employees has risen from $32 to $40. It is plausible that these chains might reduce their workforce to further offset the wage hikes.

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This could result in layoffs, with the remaining employees having to shoulder additional work during their shifts. Consumers will also bear the brunt of the price increases.

Economic changes do not occur in isolation. One action can trigger a ripple effect that impacts the entire economy. As wages increase, prices rise and the workforce shrinks.

Governor Newsom's failure to comprehend this could lead to a harsh economic lesson for Californians.

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