Reason Magazine reporter Bess Byers outlined the economic consequences of California’s fast food minimum wage law while highlighting comments from Gov. Gavin Newsom defending exemptions built into the legislation.
The law, known as AB 1228, raised wages for fast food workers and created a new regulatory structure, but Byers said the results have included job losses, restaurant closures, and higher prices.
“What happens when the minimum wage goes up? Well, California is getting an experiment in that right now. Just ask Gavin Newsom,” Byers said.
She explained that the law was pitched as a way to ensure fast food employees were paid fairly but quickly produced unintended consequences.
“California wanted to make sure fast food employees earn their fair share, and that’s when 557,000 workers across 30,000 restaurants got an economic reality check,” she said.
Byers said AB 1228 imposed a government-mandated pay increase that moved hourly wages from $16.21 to $20 over three years.
“AB 1228, implemented a government mandated pay raise for all fast food workers from 1621 to $20 per hour,” she said.
The law also includes ongoing increases and a new regulatory body.
“The bill requires annual wage increases of 3.5% and creates a special fast food Council within the government,” Byers said.
According to Byers, that council has broad authority for several years.
“This council holds the power to set fast food wages until January 1, 2029 when the Council and its authority allegedly end, because government programs always end,” she said.
Byers also pointed to a long list of exemptions that shielded certain businesses from the wage mandate.
“If you’re worried about this impacting your favorite restaurant? Well, casual dining restaurants, buffets, smaller fast food chains, donut shops, snack shops, grocery stores, concession stands, most delis, restaurants within a grocery establishment, restaurants connected to an airport, hotel, Event Center, theme park, museum or gambling establishment and Panera Bread are all exempt from the law,” she said.
She described one exemption as unusually specific and said it was pushed by Newsom.
“Apparently, there’s this weirdly specific exemption for restaurants that sell bread as a standalone menu item if it weighs at least half a pound after cooling and Gavin Newsom pushed for that,” Byers said.
Byers said the exemption benefited Panera Bread and its major franchise owner.
“You see, Gavin Newsom went to high school with Greg Flynn. Greg Flynn owns the Flynn Restaurant Group. They own 2300 chain restaurants across the US and other second largest Panera franchisee in the world,” she said. Byers noted Flynn’s political support.
“Flynn has donated more than $220,000 to Newsom’s campaign since 2017 and 100 grand of that was to defeat the recall. So for some totally unknown reason, he really wants this guy in office,” she said.
When questioned about the exemption, Newsom defended it as part of legislative negotiations.
“I mean, that’s part of the sausage making. That was part of 257 the original bill, and there was part of the negotiation. It’s the nature of negotiation,” Newsom said.
Byers said the economic effects of the law became clear after it took effect. She cited comments made after passage of the bill.
“After the bill passed, assembly member Chris Holden said: ‘the rest of the country is watching what’s happening in California.’ And yeah, that’s an understatement,” she said.
She detailed business closures and layoffs following implementation of the law.
“One year after implementing the so called FAST Act, we are finally seeing its effects, and they are exactly what you would expect,” Byers said.
“Rubio’s coastal grill closed 48 locations across the state. MOD Pizza closed five and Pizza Hut laid off all 1200 delivery drivers,” she said.
Byers said the employment data showed significant losses. “In total, fast food employment decreased by 2.7% which cost California 18,000 jobs,” she said.
She added that remaining workers also felt the impact.
“Restaurants replaced employees with digital kiosks, and those who did keep their jobs saw their hours decrease by almost two months per year,” she said.
According to Byers, even mainstream outlets have acknowledged the negative effects.
“AB, 1228, is such a disaster, even CNN admits it’s debatable,” she said. She contrasted California’s experience with the rest of the country.
“Job numbers at the same time as Gavin Newsom’s California lost fast food jobs, the sector has grown in the rest of the nation,” she said.
Byers concluded that consumers have also borne the cost. “To be fair, though, Newsom is responsible for some exceptional growth,” she said.
“Fast food prices are up more than 13% since the law took effect.”
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