Some things in life are difficult. Predicting the negative consequences of exorbitant and rapid minimum wage hikes isn’t one of them.
In 2023, California Gov. Gavin Newsom signed a $20-an-hour minimum wage law for fast-food workers. It went into effect in April 2024. For all workers, the minimum wage in California is $16.90 an hour.
This reform hasn’t fixed California’s cost-of-living issues or kept people from fleeing.
A working paper from the University of California, Santa Cruz looked at the aftermath. The research, led by UC Santa Cruz economics lecturer Stephen Owen, found “many unintended consequences of this legislation.”
“The results indicate a plethora of negative outcomes such as higher menu prices for consumers, reductions in employee working hours, widespread elimination of overtime and loss of benefits for employees,” the research team noted. “Further decreases in employee opportunities are being driven by automation and the adoption of labor replacement technologies is accelerating.”
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In other words, the obvious consequences of artificially boosting worker pay beyond market rates came to pass.
The higher labor costs led to “sector specific minimum wage with investments in new technology and automation.” Computers don’t call in sick, and companies don’t pay them by the hour. As the cost of labor increases, automation makes more financial sense.
The paper details Chipotle’s use of “Cobots,” or collaborative robots. A potential “automated assembly line machine” could create the restaurant’s bowls and salads in the future. AI ordering offers further opportunities to reduce headcount. This shift might create job opportunities for robot repairmen, but it’s unlikely to help a restaurant’s minimum-wage employees. They are more likely to have experienced a reduction in hours worked.
In the meantime, the authors estimate that fast-food prices are up 8 percent to 12 percent since September 2023. In addition, “Franchise owners have seen profits decline, which will negatively impact their future investments to expand and create jobs,” the paper notes.
This law has hurt employees, consumers and business owners. Leftist demagogues specialize in lose-lose-lose policies. Perhaps California voters are starting to recognize that legislation can’t bypass the laws of economics. In November 2024, California voters narrowly rejected an initiative that would have raised the minimum wage to $18 an hour.
Despite the failure of unrealistic minimum wage hikes, labor unions and leftist groups believe they’ve found a sure-fire solution. They want to raise the minimum wage to $30 an hour by 2030. Give them another few decades, and they’ll be pushing a $90 minimum wage. Of course, that assumes there are any businesses left in California.