The Staggering Decline of Fast Food Jobs and Surge in Restaurant Closures Due to California’s $20 Minimum Wage

By: Georgia | Published: Jun 09, 2024

Since the implementation of California’s new $20-an-hour minimum wage, there has been a significant reduction in employment across various fast food chains. 

A trade group reports that almost 10,000 positions have been eliminated from businesses including Pizza Hut and Burger King, attributing these cuts directly to the increased labor costs from the wage hike.

Rubio’s Coastal Grill Files for Bankruptcy

The rise in minimum wage has had a profound impact on Rubio’s Coastal Grill, a popular Mexican fast food chain, which has filed for Chapter 11 bankruptcy and closed 48 of its locations across California. 

Advertisement
Two people unpacking and preparing to eat various dishes from Rubio’s, including salads and tacos

Source: Rubio’s/Facebook

This move highlights the financial strain the wage increase has placed on restaurant operations within the state.

Advertisement

CABIA Criticizes Wage Increase

The California Business and Industrial Alliance (CABIA) has been vocal in its criticism of Governor Gavin Newsom for his role in passing the new minimum wage law. 

Advertisement
Governor Gavin Newsom standing at a podium, gesturing during a speech at a public event

Source: Wikimedia Commons

They argue that this legislation has forced businesses to raise prices and struggle financially, significantly affecting their ability to operate profitably under the new wage conditions.

Mock 'Obituaries' Spotlight Wage Law Fallout

In a striking USA Today ad, CABIA displayed mock ‘obituaries’ for famed fast food outlets affected by the wage increase. 

Advertisement
A meal from Rubio’s served on a table, featuring a chicken bowl with guacamole, salsa, and a drink in a glass, next to a Rubio's branded bag

Source: Rubio’s/Facebook

This bold move was intended to shed light on the severe repercussions for both small eateries and large chains.

Changes Across Major Fast Food Chains

Major fast food chains are reportedly adjusting to the new wage law by increasing prices and reducing operational hours. 

Advertisement
Modern McDonald's restaurant exterior with large glass windows and the iconic golden arches logo

Source: Wikimedia Commons

One notable example includes a McDonald’s franchisee who owns 18 locations in California, who is “considering reducing store hours, hiking menu prices and delaying renovations to offset the impact of the state’s $20 hourly minimum wage for fast-food workers.”

Anticipatory Job Cuts

Anticipating the financial impact of the new law, chains like Pizza Hut and Round Table had already dismissed thousands of delivery workers even before the legislation was officially passed. 

A close-up view of a Pizza Hut pepperoni pizza in a cardboard box, showing toppings of cheese, pepperoni, and seasoning

Source: Wikimedia Commons

These preemptive layoffs were attempts to mitigate the forthcoming financial strain anticipated from the wage increase.

Advertisement

The Details of the New Wage Law

The legislation signed by Governor Newsom last September mandates a minimum wage of $20 per hour for fast food workers at chains with more than 60 locations nationwide. 

Governor Gavin Newsom speaking at a podium in an indoor setting, with a California state flag displayed behind him

Source: Wikimedia Commons

This represents a 25 percent increase from the previous minimum wage of $16 an hour, which was instituted in January.

Advertisement

Federal vs. State Wage Policies

While California has taken significant steps to increase wages for fast food workers, the federal minimum wage has remained unchanged at $7.25 an hour for many years. 

A bustling Popeyes restaurant showing the service counter, menu screens, and staff preparing food in the kitchen area

Source: Wikimedia Commons

This disparity highlights the varying approaches to wage policies across different states, with California leading in aggressive wage adjustments.

Advertisement

Business Impact According to CABIA

Tom Manzo, president and founder of CABIA, expressed his concerns to Fox Business, stating, “California businesses have been under total attack and total assault for years. It’s just another law that puts businesses in further jeopardy.” 

An assortment of fast food items including burgers, crinkle fries with cheese and bacon toppings

Source: Wikimedia Commons

His comments reflect the broader business community’s anxieties about the new wage law.

Advertisement

The Economic Limit of Price Increases

Discussing the economic realities of significant wage increases, Tom Manzo said, “You can only raise prices so much. And you’re seeing it. People are not going to pay $20 for a Big Mac. It’s not going to happen.” 

The illuminated sign of a Chick-fil-A restaurant glowing against a dark evening sky, with the building’s brick facade visible

Source: Wikimedia Commons

This quote captures the tension between rising operational costs and consumer price sensitivity.

Advertisement

Governor Newsom's Statement on the Wage Increase

Upon signing the new wage law, Governor Newsom expressed optimism about the positive changes it would bring. 

A close-up view of Governor Gavin Newsom smiling, dressed in a navy blue suit, outside during the day

Source: Wikimedia Commons

He said that the state was moving “one step closer to fairer wages, safer and healthier working conditions, and better training by giving hardworking fast food workers a stronger voice and seat at the table.”

Advertisement

Acceleration of Automation in Fast Food

In response to the wage increase, Harsh Ghai, a Burger King franchisee with 140 restaurants, announced plans to expedite the installation of digital kiosks across his operations. 

A Burger King restaurant featuring its iconic logo on the drive-thru sign, with a vintage car parked nearby

Source: Wikimedia Commons

Originally planned over five to ten years, the rollout is now expected to occur within the next 30 to 60 days, reflecting a shift towards more automated service systems to manage rising labor costs.

Advertisement