As of April 1st, California’s minimum wage has been increased to $20 per hour. While many fast food workers may have initially rejoiced at the news, it will unfortunately come with the potential price of no longer being employed.

Overview of the California FAST Recovery Act

On September 5, 2022, Gov. Gavin Newsom signed the Fast Food Accountability and Standards (FAST) Recovery Act, also known as AB 257. The bill would require fast-food businesses with 60 or more locations to increase the minimum wage to at least $20 per hour. The bill has been supported by workers, advocacy organizations, and labor unions. It was fiercely opposed by the fast food industry, as well as a variety of chambers of commerce.

According to those against the new bill, the bill would increase labor costs substantially. This would inevitably lead to an increase in fast-food prices, the closure of many locations, and mass job losses.

Fast Food Restaurants React to the California FAST Recovery Act

As predicted, as a result of Newsom’s decision, fast food workers are losing their jobs in California. The most prevalent restaurants having to reduce staff are Pizza chains. Several establishments have had to slash jobs to remain ahead of the financial losses that would be incurred.

According to Fox Business, in December, Pizza Hut announced the need to cut more than 1,200 delivery jobs, with some locations discontinuing their delivery services altogether. It seems the majority of these cuts are affecting food delivery drivers, with these services now having to be outsourced to third-party companies in response.

Source: Fox Business – https://www.foxbusiness.com/fox-news-food-drink/california-food-chains-laying-off-workers-ahead-new-minimum-wage-law

The California FAST Recovery Act Seems to Only Benefit the State Government

For many people, this will have a detrimental impact on their lives. The only people truly benefitting from this law will be the local government.

The law will require the appointment of more government personnel:

“This bill would enact the Fast Food Accountability and Standards Recovery Act or FAST Recovery Act. The bill would establish, until January 1, 2029, the Fast Food Council (council) within the Department of Industrial Relations, to be composed of 10 members to be appointed by the Governor, the Speaker of the Assembly, and the Senate Rules Committee, and would prescribe its powers.”

Source: LegInfo – https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202120220AB257

The increase in income for employees ultimately becomes an increase in taxable income for the state:

“If the council raises the wage floor for fast-food workers and reduces wage theft it would create savings to the state budget through decreased utilization of state safety net programs as well as increased tax revenue.”

Source: UC Berkeley Labor Center – https://laborcenter.berkeley.edu/fiscal-effects-of-the-fast-food-accountability-and-standards-recovery-act-ab-257/

The Negative Impact of the California FAST Recovery Act

While that might sound nice on paper, this ultimately, once again, puts the economic and social stressors back on the taxpayers:

“The minimum standards imposed on the restaurant industry will inevitably increase operational costs. AB 257 does not dictate how restaurants are to adapt to those increases. Therefore, restaurants may have no choice but to pass those price increases on to customers, on the heels of similar moves driven by the COVID-19 pandemic. As a result, employers run the risk of decreasing demand, especially in low-income areas.”  

“Proponents of AB 257 fail to consider its potential for negative consequences on fast-food employees themselves. To offset the cost increases, employers are likely to turn to technological efficiencies and innovations, such as automated drive-thru ordering, self-order kiosks, and automated fryers and other kitchen equipment. The very employees AB 257 seeks to protect are at risk of losing their jobs if AB 257 becomes the law.”

Source: Fisher Phillips – https://www.fisherphillips.com/en/news-insights/californias-fast-food-industry-faces-devastating-consequences-after-lawmakers-pass-union-backed-bill.html

This law will not only impact the franchisees, but it will also affect the buyers and workers. The cost of fast food will once again increase, more jobs will be cut, and the level of service will decline due to the replacement of personnel with technology.