California’s War on Fast Food Jobs

Higher prices created by a $20 minimum wage for burger joints will lead to fewer customers, reduced profits, fewer restaurants, and a loss of jobs.

During a recent meal at a family-run restaurant in a small town, I noticed that the owners included in the menu an apology note to customers for the high prices they were charging. We all understand the owners’ predicament, as inflation has driven up the costs of pretty much everything, especially groceries. Nevertheless, customers who try to live within their budgets have little choice but to pare back their unnecessary restaurant trips.

I’m not the only one doing so. “Rising labor and food costs, ballooning interest rates, and corporate brand owners’ demands for upgrades and operational improvements have strained profitability for a number of fast-food chain operators,” according to a recent Bloomberg Law article focusing on increasing numbers of restaurant franchise bankruptcies. Inflation is hitting every industry, but those reliant on discretionary spending will suffer the most.

One would have expected the California Legislature to have recognized this industry’s ongoing, post-COVID problems before adding to their burden. Lawmakers need only wander around the Capitol and notice the large number of long-time eating establishments that have shuttered. And yet one of their signature legislative accomplishments this year will only hasten restaurant closures and job losses.

No matter what happens in broader society, we can always count on the California Legislature to do the bidding of the state’s powerful unions, which are committed to little else beyond boosting their membership rolls—whatever that might mean for the broader economy. And so the state recently agreed to a deal that will dramatically increase fast-food wages and make it more difficult for private companies to set their own operating policies.

In 2021, the Legislature introduced the Fast Food Accountability and Standards (FAST) Act, which echoed the European sectoral-bargaining model whereby a government commission sets the wages and working conditions in an industry. This radical idea would have essentially given unions control over the industry—saving them the difficulty of actually organizing workers.

Although that effort failed, the Legislature in 2022 passed two nearly as significant laws, per the pro-union OnLabor website: First, Assembly Bill 102 revived the moribund Industrial Welfare Commission and gave it the powers of a sectoral-bargaining commission. Second, Assembly Bill 1228 would have raised fast-food minimum wages to $22 an hour with an annual upward ratchet.

It also “would have made franchisors jointly liable for labor violations—a long sought-after provision that was taken out of the final version of the FAST Act,” On Labor added. The wage hike was problematic, but making national fast-food companies liable for labor violations at independently owned franchises would have destroyed the franchise model in California.

These laws posed existential threats to the restaurant industry, which then qualified a referendum on AB 1228 for the 2024 general election. In September, Gov. Gavin Newsom announced a “truce.” The industry pulled its ballot measure and agreed to a $20 minimum wage. In return, Newsom and unions limited the power of the Fast Food Council and removed joint-liability provisions.

The restaurants spared themselves a multimillion-dollar ballot fight, gained a lower wage, and preserved franchising, but the net result will be the same. A government agency will grab many management powers. Wages will go up early and often. Labor costs account for one-third of fast-food costs, so prices will rise. McDonald’s and Chipotle already have announced higher prices for next year.

The unions are claiming a victory for workers, but it’s not hard to guess the result. Higher prices will mean fewer customers and reduced profits. That means fewer restaurants and fewer jobs. Although the legislation only applies to fast-food chains with more than 60 outlets, it will drive up costs for mom-and-pop restaurants. They will have to compete for workers with chains that must pay a much-higher wage.

That’s not the only bad news. “Making it illegal to pay less than a given amount does not make a worker’s productivity worth that amount—and, if it is not, that worker is unlikely to be employed,” wrote famed economist Thomas Sowell. In other words, restaurants will not hire people who aren’t productive enough to justify the wage.

It will be tougher for young workers who lack job skills and for disabled people to get these jobs. I’m already noticing a higher percentage of older workers at fast-food establishments. I’m also noticing far more kiosks. Let’s be blunt: Fast-food work isn’t meant to be career work for most people. These are great ways to earn quick cash and learn basic skills, which can then be leveraged into better jobs as people build better lives for themselves. Unions and progressives want to take this approach to other industries.

Click here to read the full article in

California food prices could get even more expensive as fast food wages set to increase

LOS ANGELES – The rising cost of groceries has left consumers feeling the pinch, and now, as California greenlights a $20 minimum wage for fast food workers, residents are bracing themselves for potential price hikes in the fast food industry. 

In September, a moment of victory and applause reverberated when Governor Gavin Newsom signed into law a $20-an-hour minimum wage for fast food workers, like Anisha Williams, marking a significant increase from the existing rates. 

While some larger fast food franchises, such as Chipotle, currently promise $16.25 per hour, the state minimum wage is set to rise to $17 an hour in January, with the new wage for larger fast food franchises reaching $20 an hour in April.

This significant pay raise for fast food workers may have unintended consequences for consumers.

McDonald’s and Chipotle are already in discussions about raising their prices to offset the increased labor costs. 

Even before this wage increase takes effect, customers are feeling the financial impact of dining out.

Brianna Sosana, a resident of Huntington Park, reminisced about the days when meals could be bought for just a dollar, whereas now, a simple meal can easily cost $10 or more. 

Tina Carranza from Bell Gardens expressed concerns about the rising prices and the potential burden on families, with a single meal costing up to $20.

Caila Glickman, a Silver Lake resident, highlighted the challenge of affording fast food meals, noting that lunch often costs her more than $15, which is unsustainable for her daily expenses.

While many recognize that they pay for the convenience and speed of fast food, some individuals, like Brenda Perez, a Huntington Park business owner, are willing to adapt if prices increase significantly, but they acknowledge that such an increase would need to be substantial to deter them from frequenting these establishments.

Click here to read the full article in Fox11

Do You Want Fries With That Shakedown?

California’s government has outdone itself with AB 257, a controversial sop to unions that will hurt the poor and raise prices in the fast-food industry.

There’s a joke circulating in California that goes like this: What’s the difference between the Titanic and the state of California? Answer: The Titanic went down with its lights on.

You don’t have to live here to get the dark humor, though it helps. Governor Gavin Newsom led the effort to eliminate oil drilling and ban the sale of new gas-powered vehicles beginning in 2035 — and simultaneously begged us not to run the AC or charge electric vehicles during California’s annual sizzling farewell to summer.

So, few of us were surprised when, on Labor Day 2022, the governor signed Assembly Bill 257, which promises to rescue the poor but will in fact immiserate them. The law was set to go into effect today but has been put on hold by a judge, for now.

Called the FAST Recovery Act, the new law will do for unions what decades of organizing could not accomplish in the dynamic fast-food business. It neatly eliminates the hard work of organizing unwilling workers by declaring them wards of a state commission comprising 13 political appointees who will govern work and wages in California’s fast-food businesses.

In California, political appointees like those proposed in AB 257 are manufactured by the legislature’s Democratic supermajority. That veto-proof majority, in turn, is curated by union leaders — people who raise in excess of $1 billion annually through union dues and spend much of that cash to finance the campaigns of candidates who, once in office, return the favor by doing what the unions tell them to do — things like passage of AB 257.

The smart money says California’s elected officials will hustle to appoint union-friendly commissioners who will quickly impose on fast-food operators a $23 hourly wage, more costly benefits, and molecular regulation of work rules.

In an industry that operates on razor-thin margins, this will have two immediate predictable outcomes. On the worker side, higher wages, richer benefits, and more cumbersome labor laws will lead to job cuts as franchise operators seek to curb their skyrocketing labor costs. In some places, restaurant owners will rapidly automate; ATM-like ordering kiosks will replace actual people — primarily immigrants and other minority people who, by way of the fast-food business model, are just beginning their ascent on the American economic ladder. Other business owners may simply sell off to larger enterprises whose high volumes will allow them to cope with slimmer margins. That will make it harder for workers to rise into positions of management and ownership.

On the customer side, as some franchisees simply close permanently, we’ll see the expansion of what progressives have called “food deserts” in poor communities already underserved by grocery chains. Customer service in the remaining stores will decline and prices will rise.

So, in a kind of grim partnership, poor customers and rising workers, immigrants and the native-born, will suffer together. This is the iron law of California progressivism: Claim that new laws will help the poor. When the actual effect turns out to be catastrophic for the poor, blame capitalism/markets/billionaires/racism, and expand government control of the business. Rinse, repeat, and promote as a national — even global — model for equity. And if Californians have anything to say about it, AB 257 will be coming to you, no matter where you live in the United States.

The most eye-popping criticism of AB 257 came from California’s own Department of Finance. In June, the department recommended that legislators vote against the bill. Its analysis concludes with language that can be applied to much of California’s regulatory empire, and is worth quoting in its entirety:

Finance is opposed to this bill because it creates significant ongoing costs at DIR [the state Department of Industrial Relations]. Additionally, it creates a sector-specific rule-making body within DIR, which could lead to a fragmented regulatory and legal environment for employers and raise long-term costs across industries. Finally, it is not clear that this bill will accomplish its goal, as it attempts to address delayed enforcement by creating stricter standards for certain sectors, which could exacerbate existing delays.

“Not clear”? In California, it’s absolutely clear that AB 257 — now law — will not accomplish its goal.

Where is such a bad idea conceived? Partly in academia, where professors celebrate as progress the imposition of a failing European model of government–labor–business “cooperation.” Writing in Fortune, Thomas Kochan exulted that, with AB 257, “California has a unique opportunity to launch a path-breaking high-road business and employment strategy for owners and workers in its fast food industry.” He hopes that its success will spread “across the nation.”

(Note to Dr. Kochan: You’re professor emeritus at MIT’s much-honored Sloan School of Management. I just live and work in California. But please, never, ever use any form of the infinitive “to break” and “California” in the same sentence. It’s what people in your school’s psych department call a Freudian slip.)

In California, the engine running AB 257 is organized labor, particularly the Service Employees International Union (SEIU) and its national “Fight for $15” activist wing.

SEIU has struggled lately. In part that’s because the Supreme Court’s 2018 decision in Janus v. AFSCME made government-union membership voluntary. Nearly 30 percent of government workers eligible to join SEIU and other unions have responded by hitting the eject button. The hundreds of dollars those workers save on annual union dues means lost revenue to the unions hoping to represent them. (Disclosure: California Policy Center, where I am president, has played a leading role in helping workers leave their unions.)

That rush to the union’s exits has created a cash crisis at SEIU. The union responded by pushing AB 257 with the expectation that the Fast Food Council will move rapidly to recommend universal membership in SEIU as the only solution to low pay and dangerous work conditions.

About those work conditions: Many media reports banging the drum for AB 257 relied on a UCLA Labor Center study that claimed to discover that working at your favorite burger joint is like cobalt mining. Vox cited UCLA’s finding that “43 percent of workers experienced workplace injury or illness, nearly half experienced verbal abuse, and a quarter said they were retaliated against by their managers for reporting workplace issues.” So did the Los Angeles Times, the San Francisco ChronicleCalMatters, and the Sacramento Bee.

Reporters were so eager to amplify a story about industrial “wage theft,” “workplace injuries,” and medieval exploitation that none took the time to examine UCLA’s study. In fact, recently published internal UCLA documents reveal that “the study was part of a larger advocacy strategy by the SEIU and its Fight for $15 campaign.” Specifically, the documents show that UCLA’s “independent” researchers outsourced the labor of recruiting and surveying fast-food workers to SEIU. When the study was released, enthusiastic reporters asked to interview the aggrieved workers. Then, UCLA’s documents show, “those labor groups even took efforts to obscure” the snuggly relationship between researchers and union activists.

You might be tempted to say that because the UCLA study was junk — corrupt, in fact — we may never know how truly grim things are in the fast-food business. But we do know: You are in fact safer working in a fast-food restaurant than in most other industries.

Newsom’s signature on AB 257 was still wet when SEIU unleashed its national media campaign promoting the California law as the solution to labor problems everywhere. “This is LANDMARK labor legislation that presents a way forward for fast food workers in this country,” SEIU said over and over. Using the hashtags #UnionsForAll and #AB257, union activists in TexasFloridaMissouri, and beyond posted photos of workers spontaneously celebrating California’s win as their own. Were they moved by the spirit of international labor, roused by their own personal experience? They were not. Their messages were crafted and amplified by one of California’s largest unions.

Let’s summarize: AB 257 will likely kill the jobs of immigrant and poor men and women who want to work in the fast-food industry — because this work, however difficult, is better than the alternatives. It imposes what union organizers could not achieve through voluntary association. It will raise food prices and limit food options in already struggling neighborhoods. It is opposed by the very regulatory body that is supposed to supervise its implementation. Its passage relied in part on a corrupt “study” by a major state university working with the union that will benefit from the new law.

It’s now likely that AB 257 will be opposed at the ballot box. As soon as Newsom signed the bill, an association representing fast-food businesses began gathering signatures for a statewide ballot proposition to repeal it. On December 9, the California secretary of state’s office declared that the association had submitted more than the minimum number of signatures to qualify the measure for the November 2024 ballot. Under California law, that should have postponed implementation of AB 257. Instead, the state’s Department of Industrial Relations announced it would dispense with a century of case law and impose the law on January 1. On December 29, the association announced it will sue the state to uphold its own laws. One day later, on December 30, a state judge cut the baby in half: The state can begin considering appointments to the commission, but it can’t change wages or work rules.

Click here to read the full article in the National Review

California Union Alleges That Fast-Food Effort to Block New Labor Law is ‘Willfully Misleading Voters’

California’s largest union on Thursday lodged a complaint with state officials alleging that a fast-food industry coalition violated state election rules in its campaign to block a landmark labor law from going into effect.

The complaint by Service Employees International Union California, which was filed both with California’s secretary of state and its attorney general’s office Thursday, focuses on a referendum filed in September seeking to repeal AB 257, which Gov. Gavin Newsom signed into law on Labor Day. The union sponsored the legislation, known as the Fast Recovery Act, to boost protections for fast-food workers. 

The union alleges that in a sprint to qualify the referendum for the November 2024 ballot, business trade groups, fast-food corporations and franchisees are backing a vigorous and costly voter signature-gathering process that is “willfully misleading voters.” Hired petition circulators for the referendum, according to the complaint, have approached voters and asked them to sign the petition under the false pretense that the effort seeks to raise the minimum wage for fast-food workers.

Instead, the referendum effort would allow voters to decide whether to overturn the Fast Recovery Act, which creates a first-of-its-kind council of workers, company representatives and state officials with the authority to raise the minimum wage for franchise restaurant workers as high as $22 next year.

The council has a mandate to set minimum industry standards on wages, working hours and other conditions for fast-food workers statewide. It’s a model that could transform the way workers negotiate standards with their employers not just in California but across the U.S.

Throughout the legislative process, fast-food corporations and franchisees argued it unfairly singled out their industry, and would burden operations with higher labor costs and cause food prices to skyrocket.

Save Local Restaurants, the coalition pushing to overturn the law, said in a statement that it “has been vigilant in maintaining compliance with California’s election laws” and added that it finds the complaint “frivolous.”

“This is another brazen attempt by the SEIU to force a law on Californians that they do not want and that they cannot afford,” said the coalition, which is spearheaded by the International Franchise Assn. and the National Restaurant Assn. 

The coalition said, in line with past critiques, that the new law would raise food prices and ultimately “cost thousands of jobs, and force the closure of local businesses.”

The coalition said it has collected “nearly a million” signatures thus far: “We are on track to collect hundreds of thousands of signatures above what is legally required due to the voters’ overwhelming opposition to this misguided law.”

It’s standard practice to collect more than the minimum number of signatures because some signatures may be deemed invalid.

The complaint alleges several instances of petition signature gatherers misrepresenting the issue. One contracted circulator in Los Angeles repeatedly said the petition “was for the minimum wage to go up,” while another in Stockton, Calif., asked for a signature on a “petition that will raise the minimum wage for fast food workers to 22 bucks an hour,” according to the complaint.

Click here to read the full article in the LA Times