Workers and consumers pay the price for the state’s rising wage mandates.
California’s $20 an hour fast-food minimum wage took effect two months ago, and the casualties are mounting. Rubio’s Coastal Grill, famous for its fish tacos, closed 48 restaurants in the state on Friday.
“The closings were brought about by the rising cost of doing business in California,” the Carlsbad-based fast-casual chain explained. It added that its decision to close the four dozen “underperforming locations” in the Golden State followed a review of operations and “the current business climate.”
Gov. Gavin Newsom responded by blaming Rubio’s. Communications deputy Brandon Richards tweeted that the chain faced other problems and had filed for bankruptcy in 2020. A major culprit then was Mr. Newsom’s excessive Covid lockdowns. The flack also suggested that the minimum wage isn’t doing damage because Chipotle “just reported HUGE profits.”
But Chipotle has locations across the U.S. Chipotle execs also noted on an April earnings call that California’s wage mandate had caused it to increase menu prices 6% to 7% in the state and said it would hurt restaurant margins. They noted that Chipotle’s competitors were in worse shape to weather higher labor costs.
Rubio’s didn’t specifically mention California’s new $20 minimum wage, which is a 25% increase over its already burdensome $16 an hour minimum. California’s soaring energy and insurance costs also contribute to the hostile business climate. But the fast-food wage mandate might be the difference that makes some restaurant locations unprofitable.
Workers will be the victims. Restaurants are cutting hours and automating tasks where possible to reduce labor costs. California also requires business to pay overtime at a rate of time-and-a-half if employees clock more than eight hours in a given day, which would equal $30 an hour for fast-food workers. This is another incentive to reduce worker hours.
While California has added 35,100 leisure and hospitality jobs in the last year, aggregate hours worked by all workers in the industry have declined by 3%. The average weekly earnings for California leisure and hospitality workers has declined by 2.6% owing to a large drop in hours worked.
Politicians think they can dictate wages and impose regulations without consequence. California is proving they can’t.