Chilling effect of America's first $20 minimum wage revealed as businesses and workers hit out | Daily Mail Online


California's $20 minimum wage for fast food workers has resulted in job losses and restaurant closures, but some workers report improved financial situations, sparking a debate among economists about the law's overall impact.
AI Summary available — skim the key points instantly. Show AI Generated Summary
Show AI Generated Summary

Experts warned that hiking fast food wages to $20-an-hour in California would lead to job losses — and a year on the scale of cuts are becoming clear.

Roughly 22,600 positions have been lost across chains like Pizza Hut and Burger King since the law took effect on April 1 last year. Many remaining staff have also seen their hours reduced. 

On top of that, restaurants are closing. Mexican chain Rubio's Coastal Grill, which filed for Chapter 11 bankruptcy and closed 48 locations in the state.  

It is cruel irony for workers and unions who fought for years for higher wages — a move critics warned could trigger job losses.

The controversial wage hike — $4 more than the state's standard minimum — was introduced by Governor Gavin Newsom at chains with more than 60 locations in the US. 

One year later, questions remain over whether it has caused more harm than good.

A McDonald's worker said his hours were cut and his paycheck with the chain hasn't grown — since his hours are now limited. He has to pick up shifts at rivals.

'Now I can no longer get over 20 hours of work at my place. Have to end up working at another fast-food place to fill another 20 hours. Most fast food places will no longer give you full time hours now,' he said.

California's $20-an-hour fast food law came into effect a year ago. Roughly 22,600 positions have been slashed across chains like Pizza Hut and Burger King since then

Kerri Harper-Howie dipped into personal savings after all 24 McDonald's restaurants she owned dropped in sales

Meanwhile, Edgar Recinos, a Wingstop worker, told CNN  he is 'in the same situation [as] before the [wage] increase.'  

'It makes no sense,' he said. 'If you are cutting hours to your current workers, why are you hiring new people and blaming the wage increase?' 

Franchise owners are also feeling the pinch. Kerri Harper-Howie, who runs 24 McDonald's restaurants in Los Angeles County, said she was forced to cut 170,000 work hours, streamline roles, and raise prices. 

She even dipped into personal savings to offset losses but avoided layoffs and ended a hiring freeze. 

'I do firmly believe in our brand. I love our brand, and so I'm just hopeful that something is going to get better,' she said. 

Others haven't been as lucky. Scott Rodrick closed a McDonald's he ran for over 30 years. 

That same month, Arby's iconic Hollywood location shut down after 55 years — its owner partly blamed the wage law.

Restaurants that remain open are finding new ways to cut costs - for example by replacing their employees with kiosks. 

Burger King franchisee Harsh Ghai installed digital kiosks in all his 140 restaurants on the West Coast

As of March, California's limited-service restaurants employment dropped 3.1 percent compared to last year

The 48 Rubio's Coastal Grill shuttered restaurants were featured in a fake ad to mock 'obituaries' of popular brands last year

Burger King franchisee Harsh Ghai fast-tracked digital kiosks at all 140 of his West Coast stores — a rollout he had originally planned over the next decade. 

Still, some workers say the raise has improved their lives  Weinerschnitze worker Selvin Martinez is grateful for the change despite his shortened hours.

'Before the wage increase, I struggled to keep up with expenses. I limited my purchases. I limited what I ate,' he said. 

'I have been able to cover all of my bills, help my family financially, my savings have grown, and I'm thankful to God, because life feels easier now that I'm not as worried financially.'

Economists are divided over whether the $20 minimum wage is really at fault.

Christopher Thornberg of Beacon Economics said it is a significant factor in job losses in a report he wrote in March.

'There is no such thing as a costless policy. Every part, every policy must, by definition, have some cost,' Thornberg said. 

'And it's up to society to figure out if that trade-off is worth it, right?'

But others, like UC Berkeley's Michael Reich, disagree.  He argues California's shrinking population and sluggish economic growth are more to blame.

'If there are more people, there is going to be more demand for fast food. The different population growth is not because of minimum wage,' he said.

'So, if you don't control for that, you're looking at a correlation. That's not a causation.'

Was this article displayed correctly? Not happy with what you see?

Tabs Reminder: Tabs piling up in your browser? Set a reminder for them, close them and get notified at the right time.

Try our Chrome extension today!


Share this article with your
friends and colleagues.
Earn points from views and
referrals who sign up.
Learn more

Facebook

Save articles to reading lists
and access them on any device


Share this article with your
friends and colleagues.
Earn points from views and
referrals who sign up.
Learn more

Facebook

Save articles to reading lists
and access them on any device