A Very Predictable Reaction To The New Law

On Monday, The Wall Street Journal reported that California fast food restaurants are beginning to lay off workers in anticipation of the new minimum wage that will take place April 1.

The article reports:

A California state law is set to raise fast-food workers’ wages in April to $20 an hour. Some restaurants there are already laying off staff and reducing hours for workers as they try to cut costs.

California restaurants, particularly pizza joints, have outlined plans to cut hundreds of jobs in the months leading up to the April 1 wage mandate, according to state records. Other operators said they have halted hiring or are scaling back workers’ hours. 

Michael Ojeda, a Pizza Hut driver for eight years in Ontario, Calif., received notice in December that his last day would be in February, according to a letter from his former employer. Pizza Hut franchisee Southern California Pizza offered $400 in severance if he stayed through February, but Ojeda, who said he made hundreds of dollars a week in wages and tips as a delivery driver, went on unemployment instead. 

“Pizza Hut was my career for nearly a decade and with little to no notice it was taken away,” said Ojeda, 29, who previously supported his mother and partner on his Pizza Hut delivery wages. 

Southern California Pizza didn’t respond to requests for comment. Pizza Hut said it was aware of some of its California franchisees changing their delivery services. 

The article concludes:

Alexander Johnson, a second-generation owner of 10 California Auntie Anne’s and Cinnabon restaurants, said the higher wages would lift his labor costs by around $470,000 annually. He has reduced his staff by about 10, and his 73-year-old parents have returned to working in the business to help shave costs. 

Johnson said he turned down a recent offer to add a location in a waterfront tourist area in San Francisco because of the projected operating costs. 

“It pains me to think about shutting down stores or laying people off,” said Johnson, who moved to Nevada this year to open Scooter’s Coffee locations in the state. “I love California, and I’m very sad about what’s going on.”

This new law will also have a negative impact on people entering the workforce for the first time. Unemployment will increase under the new law, and it will be more difficult to find an entry-level job. Companies are not in the habit of training inexperienced workers at the rate of $20 an hour. I wonder how long this law will stay in place.