California’s $20 Wage Hike Triggers Restaurant Shutdowns

Earlier this year, a minimum wage hike for many fast-food restaurants in California was announced. The move garnered national attention, and some businesses weren’t up to the task.

Restaurants Close Due to Minimum Wage Hike

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Californians looking to enjoy a Fosters Freeze or Mod Pizza treat in some cities are sure to be disappointed when they find that several locations have closed their doors.

Employees Given No Notice

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No one is as shocked as the employees who turned up to work their shifts only to find that their jobs had been terminated with no notice.

Fosters Freeze Owner Mentioned Struggles, But Not Closures

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According to a former Fosters Freeze employee, the owner had mentioned that the minimum wage hike would make finances difficult but never said the restaurant would be closing.

Mod Pizza Closes Locations With Two-Day Notice to Employees

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Mod Pizza closed five locations in California ahead of the effective date of the minimum wage increase. In at least one of these locations, employees were told a mere two days prior to closure that they no longer had jobs.

Small Business Owner Speaks Out

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In a public statement, Fosters Freeze owner Loren Wright spoke out against the new minimum wage requirements, saying that it was the reason for the demise of the business.

“We Are All More Broke Than We Were 10 Years Ago”

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“Small businesses can’t survive a 120% plus [minimum] wage increase over the last 10 years,” Wright said. “We are all more broke than we were 10 years ago. It’s clear raising [minimum] wage isn’t helping.”

Bill Signed Last Year Being Blamed for Closures

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California Assembly Bill 1287, the bill that introduced the increased minimum wage for fast food workers, was signed last year by California Governor Gavin Newsom.

Controversy Surrounding Increased Wages

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The bill has since been the subject of controversy throughout the country, drawing the attention of politicians and citizens alike.

10,000 Fast Food Jobs in California Cut Since September

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Reports show that since the bill was passed, roughly 10,000 fast-food jobs in California have been slashed. Experts say that Californians should expect to see even more job losses in the industry as companies buckle under the weight of increased labor costs.

Restaurants Raise Prices in Response

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Restaurants like Wendy’s, Chipotle, and Starbucks have attempted to get ahead of the issue by increasing food prices. Their prices have jumped by 8, 7.5, and 7 percent, respectively, in the past 30 days.

Passing the Buck

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Other restaurants are following suit, with price increases being announced by several popular fast-food chains. Owners hope to pass the higher labor costs onto the customer with menu price adjustments.

Fast Food Wage Higher Than State Minimum

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The controversy surrounding the minimum wage change is vast. Many people have questioned whether fast-food workers should receive a higher wage than any other industry. The state minimum wage for other industries in California is $16 per hour.

Federal Minimum Wage Remains Unchanged for 15 Years

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Meanwhile, the minimum wage has not changed at the federal level since July of 2009. Since then, the federal minimum wage has remained at $7.25 per hour.

Washington D.C.’s $17 Minimum Wage

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Some states have opted for higher minimums, with Washington D.C. paying the most to its minimum wage workers at $17.

Wages Stagnate Despite Higher Costs

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Despite political efforts, wages have been stagnant despite the fact that the cost of living has steadily increased. Most of the opposition to increased wages comes from people who worry that small businesses won’t be able to shoulder the additional expenses.

Panera Bread’s Exemption

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Other criticisms about AB 1287 involve its exemption for restaurants that bake their bread in-house and sell it on its own. This exempted Panera Bread from the law, and a major political donor for Gavin Newsom is the owner of some California Panera Bread locations.

Owner Says He Will Fork Over $20 Wage

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The owner, Greg Flynn, has joined Newsom in denying that the exemption was made for him and has promised that he will abide by the $20 minimum wage for his California employees.

No Explanation for Why Businesses Closed Without Notice

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The restaurant owners who have shuttered their businesses in the wake of the new law have all pointed to increased labor costs to explain their decision. But they did not shed any light on why they chose not to give their employees advance notice that they would be out of their jobs.

A Bleak Outlook

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Those employees now face a challenging road ahead, given that many other restaurants have instituted hiring freezes, and those that haven’t will be dealing with a high volume of applicants.

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The postCalifornia’s $20 Wage Hike Triggers Restaurant Shutdowns first appeared on Liberty & Wealth.

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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.

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