When California’s new law raising the minimum wage for fast food workers to $20 went into effect on April 1, 2024, the state, the country, and even the world took notice. People have already seen several side effects of the law, but now, there’s another making headlines.
Members of California’s other industries, including hospital and hotel staff, want a raise too. Some will take the $20 an hour that fast food workers are getting, but others want $25. However, financial experts warn that if Governor Newsom gives in, the state’s economy could all but collapse.
Fast Food Prices Increased Immediately After the Minimum Wage Increase
The very first tangible ramification of Gov. Newsom’s bill increasing the minimum wage for fast food workers to $20 was that prices at those fast food restaurants also went up.
Several corporations like Chipotle, McDonalds, Wendy’s, Starbcuks, and Burger King all raised their prices at their California locations in April 2024. Overall, California residents are now paying an average of 7% more for their fast food than they were just two months ago, making it the most expensive state for the popular cuisine in the country.
California’s Minimum Wage Increase Led to 10,000 Layoffs
The second, and arguably more potent side effect from the law is the extensive layoffs. Nearly 10,000 Californians who worked in the fast food industry lost their jobs in the past six weeks.
Major employers like Pizza Hut, McDonald’s, and Chipotle argued that in order to keep their profits stagnant, they simply had to let dozens or even hundreds of staff members go. In fact, Pizza Hut started firing people in March in preparation for the April 1st increase.
Studies Prove That Increasing the Minimum Wage Leads to Layoffs
Although some people may be surprised by the massive layoffs, financial and employment experts knew this was going to happen.
A study conducted earlier this year by the West Hollywood City Council found that its own increase in minimum wage and paid time off mandates led to 22% of minimum wage workforce losing their jobs and 42% of employers were negatively affected.
Negative Relationship Between Minimum Wage Increase and Employment
The University of California Irvine conducted its own study in 2022 on the relationship between increasing the minimum wage and layoffs. The authors reported that they found a “strong negative relationship between minimum wage increases and employment.”
Co-author and UCI economist Deumark explained, “A $1 increase in the minimum wage in California would cause a loss of 22,000 jobs in the restaurant industry in the short term, and a cumulative loss of about 63,000 jobs after four years.”
California Residents Still Want More Per Hour
Even with this information readily available, millions of California residents who work for minimum wage are asking for a pay rise from the governor.
Labor unions that represent the Golden State’s hotel, convention, and janitorial staff are currently requesting that Gov. Newsom raise their minimum wage to $23 per hour, which would be a significant increase from the current minimum of $17.55.
California Has Already Passed a Law to Raise Minimum Wage for Hospital Workers to $25
It’s actually highly likely that California’s hotel staff will get what they are asking for in the very near future. Governor Newsom has already approved the increase in minimum wage for hospital workers, and he will probably move on to the hotel industry next.
Gov. Newsom signed the legislation to raise the minimum wage for all healthcare workers, including the janitorial and reception staff at all hospitals, to $25 an hour in October 2023. However, unlike the fast food industry, this legislation will roll out slowly. Large healthcare systems will start paying $25 per hour in 2026, but smaller clinics have until 2028 to make the change.
One Fair Wage Want $20 for All California Workers
While each of these industries is fighting their own battles for a higher minimum wage, some organizations, like One Fair Wage, want to see Newsom increased the minimum hourly rate for the entire state.
One Fair Wage has been begging California to raise the state-wide minimum wage for years. In January 2024, Newsom raised the minimum wage for all Californians from $15.50 to $16 per hour, but One Fair Wage wants $20 across the board.
Newsom Could Be Ruining California’s Economy
Newsom has spent most of his time as governor in the hot seat. His politics, spending, and dozens of new laws have undoubtedly changed California forever, but not everyone agrees they have been good changes.
Some say the Democratic governor has a spending problem. They argue he is ruining the state’s economy with an absolutely outrageous deficit, a substantial increase in inflation, and bad business choices that are leading corporations out of California.
California Is Already Unbearably Expensive
Even those who support Gov. Newsom have to admit that California is becoming unbearably expensive.
A new study from the Pew Research Center shows that life is so expensive in California that only residents who make $180,000 a year can be considered “middle class.” The median price for a single-family home is a whopping $843,340, whereas the median cost across the nation is only $387,600.
Hundreds of Businesses Could Abandoned the Golden State
In addition to the excessive cost of living for California residents, Newsom’s economy could very well lead to dozens or even hundreds of businesses abandoning the state.
Since 2020, more than 100 businesses, including American Airlines, Chevron, Tesla, Charles Swab, and Oracle, have left California and moved to states with lower taxes such as Texas, North Carolina, and Florida. And several more will likely leave this year.
Is California’s Economy in Trouble?
There is no question that California’s economy is already in trouble. However, the major concern for economists and, of course, California residents is that it could get a lot worse before it gets better.
It’s easy to understand why California’s minimum wage workers, specifically those that work in healthcare and hotel services, want to make as much money as those who work in the fast food industry. But if Newsom approves their request for an increase in their hourly rate, tens of thousands of people could lose their jobs, businesses might close, and the cost of living in the state will become even more ridiculous than it is now.
