Thousands of jobs have already been eliminated by California’s new law to raise the minimum wage to $20 for restaurant workers, which went into effect April 1st.
This from fee.org.
For eight years, Michael Ojeda delivered food for a Pizza Hut in Ontario, California, using the income he received to support his family.
In December, the 29-year-old received a letter from the pizza franchise informing him that his employment was being terminated in February. The news shook him.
Ojeda’s story was recently highlighted by the Wall Street Journal, in which he said:
Pizza Hut was my career for nearly a decade and with little to no notice it was taken away.
And Ojeda is now one of the thousands of casualties of a new California law that has raised the minimum wage for fast-food workers to $20 an hour on April 1st for all restaurant chains that have at least 60 locations nationally.
Making $20 instead of $15 sounds like a win, but economics shows there’s no such thing as a free lunch. And California lawmakers have just proven it.
When the minimum wage goes up, the money to pay workers must come from somewhere, and it typically comes from three places: higher consumer prices, reduced labor costs in other areas (fewer workers, fewer hours, reduced benefits, etc.), and lower profits and capital expenditures.
As Conservatism well knows:
A problem identified and then tackled
by a liberal is a greater problem created.
Many minimum wage proponents want to focus just on that last item (profits) and ignore the other adverse consequences of the policy. But events unfolding in California show this is a mistake.
Restaurant franchises such as Chipotle, Jack in the Box, and McDonald’s have already announced they’ll be jacking up prices to cover increased labor costs, which are expected to increase by roughly $250,000 per location for many of these restaurants (though the economics here is nuanced).
But raising menu prices isn’t the only way California restaurants are responding.
Records submitted to the state show Pizza Hut and Round Table Pizza plan to sack nearly 1,300 delivery drivers. Other chains are taking similar actions, and many restaurants have stopped hiring new workers.
This is not unexpected. Critics of the law predicted it would result in less employment, and that’s exactly what has happened.
The Wall Street Journal reported:
California had 726,600 people working in fast-food and other limited-service eateries in January, down 1.3% from last September, when the state backed a deal for the increased wages.
This is not the only way restaurants will reduce labor costs, of course.
Benefit cuts, fewer hours, and a shift toward automation are also on the table. But the layoffs at California restaurants are what is currently generating the most attention, and for good reason.
Author David Sturt explored in his bestselling book Great Work the concept that “work isn’t just a paycheck.”
For many, it’s something that brings meaning, an idea that even so-called unglamorous jobs often provide purpose and a sense of responsibility to those who work them.
This is one reason researchers say losing a job can be psychologically crushing. It destroys that sense of purpose while simultaneously taking away from people the single biggest antidote to poverty: a job.
This is not mere rhetoric. Data from the Bureau of Labor Statistics show that just 4% of people who spend at least 27 or more weeks per year in the labor force fall below the poverty line (compared to 12.4% overall). Census data show that the rate falls to 2.4% for those who work full-time year-round.
It’s not an exaggeration to say that a job is the single most important path out of poverty.
This is why so many economists lament minimum wage laws.
What the Left fails to comprehend:
[Such laws] reduce employment by raising the cost of labor above the value the worker is able to bring to the employer. This is why minimum wage laws tend to fall hardest on the most vulnerable workers in society, consigning to the unemployment line those with the fewest skills and who can offer the least value to employers.
Economist Murray Rothbard profoundly stated:
There is only one way to regard a minimum wage law:
it is compulsory unemployment, period.
If you doubt this, consider Ojeda, who, after eight years as a driver for Pizza Hut, was unceremoniously axed.
The wages and tips he received as a driver are gone, and he recently filed for unemployment.
How Ojeda will continue to provide for his mother and partner is unclear. But how he arrived here is crystal clear:
California lawmakers outlawed his job by presuming to know what a “just” wage is for restaurant workers.
Now, the California legislature is reportedly scrambling to carve out additional exemptions for restaurants. As they further reveal the truth of economist Thomas Sowell’s famous adage:
The real minimum wage is $0.
