California’s new $20 minimum wage now creates painful layoffs as businesses offset the growing costs to operate, Washington Examiner reports.
For eight years, Michael Ojeda delivered food for a Pizza Hut in Ontario, California, using the income he received to support his family .
In December, the 29-year-old received a letter from the pizza franchise informing him that his employment was being terminated in February.
The news shook him.
“Pizza Hut was my career for nearly a decade and with little to no notice it was taken away,” Ojeda said, whose story was recently highlighted by the Wall Street Journal.
Ojeda appears to be just one of the thousands of casualties of a new California law that will raise the minimum wage for fast-food workers to $20 an hour on April 1 for all restaurant chains that have at least 60 locations nationally.
Making $20 instead of $15 sounds like a win, but economics shows there’s no such thing as a free lunch, reports Washington Examiner.
When the minimum wage goes up, the money to pay workers must come from somewhere, and it typically comes from three places: higher consumer prices, reduced labor costs in other areas (fewer workers, fewer hours, reduced benefits, etc.), and lower profits and capital expenditures.
“Many minimum wage proponents want to focus just on that last item (profits) and ignore the other adverse consequences of the policy,” reports the outlet.
But events unfolding in California show this is a mistake.
Restaurant franchises such as Chipotle, Jack in the Box, and McDonald’s have already announced they’ll be jacking up prices to cover increased labor costs, which are expected to increase by roughly $250,000 per location for many of these restaurants (though the economics here is nuanced ).
But raising menu prices isn’t the only way California restaurants are responding.
Records submitted to the state show Pizza Hut and Round Table Pizza plan to fire nearly 1,300 delivery drivers.
Other chains are taking similar actions, and many restaurants have stopped hiring new workers.
Benefit cuts, fewer hours, and a shift toward automation are also on the table.
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Also Read: Food Stamps: 4 Massive Changes Now Coming to SNAP
Other Economy News Today
Your favorite tech company now lays off over 600 employees in California, shortly after it canceled a long-running project.
Apple is laying off 614 workers in California, according to a new state filing, the company’s first significant round of job cuts since the Covid pandemic.
The affected Apple employees worked at eight different facilities in Santa Clara, according to the WARN notice posted by California.
The workers were officially informed of the cuts on March 28 and the changes are effective May 27, the filing said.
Apple hasn’t been forced into the same kind of downsizing as its tech peers, largely because the iPhone maker grew more slowly than rivals during the pandemic.
The filing comes weeks after Apple canceled a long-running project to build an electric, self-driving car in a team called the Special Projects Group.
While the California notice didn’t mention the specific projects where jobs are being cut, none of the locations in the filing are at Apple’s Cupertino headquarters, but at smaller, satellite offices more likely to house secretive initiatives.
Positions that were cut include machine shop managers, hardware engineers and product design engineers, according to the San Francisco Chronicle.
An Apple representative declined to comment, per CNBC.
Layoffs in the United States continues to be a developing topic.
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Also Read: Millions May Now See Higher Social Security Money Checks
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