Recently, a narrative has emerged in the media, suggesting that California’s new minimum wage law is devastating the fast-food industry, leading to massive job losses. However, this claim, largely propagated by the California Business and Industrial Alliance (CABIA) and certain conservative media outlets, fails to stand up to scrutiny. In fact, the data tells a very different story.
The Controversial Claim
CABIA placed a full-page ad in USA Today, asserting that nearly 10,000 fast-food jobs had been lost since Governor Gavin Newsom signed the minimum wage increase into law in September. The ad claimed that various fast-food chains were either cutting jobs or raising prices in response to the wage hike, which raised the minimum wage for fast-food workers to $20 from $16 starting April 1. Business lobbyist Tom Manzo pointed to these figures as evidence of the law’s negative impact.
The Reality Check
The truth, however, diverges significantly from these claims. According to data from the Bureau of Labor Statistics (BLS) and the Federal Reserve, fast-food employment in California actually increased from September through January. Furthermore, employment continued to rise after January, reaching nearly 7,000 more jobs in April 2024 compared to April 2023.
Misleading Statistics and Misrepresentation
The source of the 10,000 job loss figure can be traced back to an article in the Wall Street Journal, which reported a 1.3% decline in fast-food employment between September and January. However, this figure was derived from non-seasonally adjusted data, which is problematic for tracking jobs in industries like fast-food that experience seasonal employment fluctuations. Seasonally adjusted data provides a more accurate picture and, when examined, does not support the claim of massive job losses.
The Broader Economic Context
It’s crucial to consider the broader economic landscape of the fast-food industry. While labor costs are certainly a significant expense, they are not the sole challenge facing these businesses. Inflation in food costs, for instance, has been a more pressing issue in recent years. For example, Chipotle Mexican Grill reported an increase in costs for food, beverages, and packaging from $2.6 billion in 2022 to $2.9 billion in 2023. Despite higher labor costs, Chipotle and other chains like El Pollo Loco have managed to maintain or even reduce their labor costs as a percentage of revenue.
The Rubio’s Coastal Grill Case
One notable case often cited in discussions about the minimum wage law is Rubio’s Coastal Grill, which closed 48 of its California locations. While rising operational costs were a factor, the primary driver behind these closures was the chain’s significant debt burden. Acquired by the private equity firm Mill Road Capital in 2010, Rubio’s faced mounting debt that led to its bankruptcy filing in 2020 and again in 2023. This high debt load, a common feature of private-equity takeovers, complicated the company’s path to profitability far more than the minimum wage increases.
The Real Impact
The claim that the new minimum wage law is costing jobs in the fast-food sector is not supported by the available data. Employment in California’s fast-food industry has actually grown, and the broader economic context suggests that other factors, such as food cost inflation and debt burdens from private equity ownership, play a more significant role in the financial health of these businesses.
In conclusion, while the fast-food industry does face challenges, the narrative that California’s minimum wage law is leading to massive job losses is a misleading one. It is important to rely on accurate, seasonally adjusted data and consider the full economic picture when evaluating the impact of such legislation.
Check out the article about the topic of California’s Minimum Wage law and the false narratives that have sprung up regarding it that was posted in the LA Times.
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