The Daily Mail (U.K.) reports California has passed a bill requiring any restaurant with 100 or more outlets nationwide to pay their workers $22 per hour. This is substantially higher than the $15.50 per hour minimum other business contend with.
According to DM the bill awaits Gov. Newsom's signature. The head of McDonald's US has criticized the bill, as well he might.
Let an old business prof explain how this will play out, if signed. The restaurants will pay the required salary, and their cost accountants will compute by how much the prices of the food will have to rise for the business to continue to be profitable.
Prices for food will rise and sales volume - number of items sold - will drop by varying degrees, depending on the store's location and the income level of its clientele.
Less sales means fewer workers will be needed. When some locations cannot operate profitably at the higher price point, no workers will be needed as the stores will close. Stores which have remained open late at night will reduce hours. All of this will happen rather quickly, within a few months to a year.
In the longer run, the increased salaries will increase the incentives for fast food chains to find mechanical and robotic replacements for human hands, further reducing employment opportunities for people who are far from affluent now.
The net result will be a substantially smaller number of workers earning roughly 40% more per hour, while those no longer needed will earn nothing. Poor areas will have fewer job opportunities and far fewer fast food outlets from which to choose, as their customers are price-sensitive.
This legislation appears to be an attack on one of the few institutions which heretofore more or less "worked" for poor Californians - fed them, hired them and got them work experience.
Afterthought: I wrote the above thinking about McDonalds, Taco Bell, Burger King, etc. However, it appears to also apply to chains like Outback, Applebee's, IHOP, Red Lobster, Olive Garden, etc. The mechanisms described above will apply here too, with allowances for somewhat different delivery models and menus. Fewer of both types will be able to prosper under the new regime.
