Q: Is the negative effect of the $20 fast-food minimum wage overblown?
Economists
James Hamilton, UC San Diego
NO: These are temporary jobs for people who need them. A recent survey found 1 in 8 Americans had worked for McDonald’s at some point in their lives. Now fewer of these jobs are going to be available in California. We’ll see some franchises close and fewer new ones get started. Restaurants that stay will automate more jobs and charge higher prices. Chalk 2024 up as another year when California has a higher inflation rate than the rest of the country.
Norm Miller, University of San Diego
NO: For essential (inelastic demand) goods, higher costs simply mean higher prices. For restaurants with discretionary demand, there will be consumer resistance to higher prices. Some will go out of business if prices are raised too high. Some fast-food places will invest in more automation replacing labor. The net result is that some workers in more efficient restaurants and higher demand locations will do better. Others will be let go. For those let go, this is a big deal.
David Ely, San Diego State University
NO: While researchers have not reached a consensus on the impact of raising the minimum wage, we should be attentive to the potential for serious negative effects, including higher fast-food prices, lower employment in the industry, and a shift toward automation. The impact will extend to other restaurants as they are pressured to match wages to retain workers. The newly created Fast Food Council has the power to increase the fast-food minimum wage beyond $20.
Ray Major, SANDAG
NO: Average profit margins for fast-food restaurants are around 5 to 8 percent. Labor represents approximately 30 percent of restaurant costs, and there is no way that they can absorb a 25 percent cost increase in labor without putting their business at risk. Costs will be passed to consumers through price increases as evidenced by $15 burger meal combos and the $6 6-inch Subway sandwich “deal.” Gone are the days of the $5 footlong deal.
Kelly Cunningham, San Diego Institute for Economic Research
NO: Raising the cost of labor above the value a worker generates for an employer will reduce employment and fall hardest on those having the least skills. When the job is eliminated or never created, the workers’ effective wage becomes $0. Focusing only on certain industries while allowing exemptions for some businesses distorts the labor market and will lead to unintended consequences, compounding expenses, and overwhelming the individual increase of wage rate imposed for some jobs.
Executives
Jamie Moraga, Franklin Revere
NO: Companies won’t absorb this increase; they raised prices in response. Consumers will also see higher service charges, reductions in food portions, less service and store closures. Companies will continue to pivot to automation, which can eliminate jobs, cut hours, and reduce benefits and compensation. Californians already have the highest prices across the board, and there’s no end in sight. The lack of affordability will drive both residents and businesses out of the state.
Haney Hong, San Diego County Taxpayers Association
NO: Money doesn’t grow on trees, and it’s coming from somewhere in the economy. We continue to see widening income inequality and growing poverty in California. Let’s not forget that recently many of us here thought that San Diego’s population was going to continue shrinking. The impacts are yet to be seen, and if this was intended to help the working poor, all the recent minimum wage increases don’t have a lot to show for it.
Phil Blair, Manpower
NO: We are naïve if we think mandated programs that increase the cost of doing business will not be passed on to consumers. Fast-food companies that are affected have two choices — raise prices or cut staffing levels. Or both. This mandate is especially unfair since it covers only large national chains and not middle or small operators. Legislation that targets one group of workers for increased benefits and not others seems innately unfair. Plus, labor supply and demand would have moved these workers up to this level on its own very soon.
Bob Rauch, R.A. Rauch & Associates
NO: Minimum wage increases for fast-food workers impact wages throughout the organization and market. They hurt the most vulnerable and harm total compensation as employers cut hours, reduce benefits, automate, or close. Minimum wage hikes result in fewer jobs, fewer hours, fewer benefits, and less consistent hours. Minimum wage increases also destroy teen job opportunities and cause prices to rise. Expanding job opportunities through pro-growth policies raises wages for all. Imagine if California did that.
https://www.sandiegouniontribune.co...increase will,their consumption of fast foods.
