The esteemed economist Thomas Sowell quipped, “Unfortunately, the real minimum wage is always zero.” California is sadly learning this hard lesson as we speak.
Many California workers went from “Hurray!” to pink slips after California voters sent zealots into seats of power across the state to enact zany laws, like AB 1228. Governor Gavin Newsom signed the bill last year that raised the minimum wage to $20 per hour for fast-food workers (with an exception for a donor), his legislative super-majorities guaranteeing the outcome. The lid was off for minimum wage hikes in the state’s other industries and in the many specific locales in the state enthralled by collectivist dreams. Now, the reality: everyone didn’t get the leap in pay. Many of those so-called “oppressed” found their hours cut or sent home without any hours, having lost their jobs.
All of this is a reminder of another Sowell witticism: “There are no solutions. There are only trade-offs.” You can only get things after giving up other things. The politicos issued the decree, “Thou shalt pay no one less than $20 per hour”, that led to those still facing a bottom line to cope by reducing the payroll. So, the numbskulls in power unwittingly created a “nominal” minimum wage, and a “real” one: nominal = $20; real = $0!
Lee E. Ohanian with the Independent Institute chronicles the number of workers who were zeroed out in the ungolden state (see #1 below). 9,500 lost employment in the state’s fast-food industry from fall to January of this year. Pizza Hut and Roundtable said goodbye to 1,300 delivery personnel. El Pollo Loco and Jack in the Box are shifting to robots. Thus, total employment in the state’s private sector during the same interval dropped .2%. Is this “Bidenomics”, or maybe “Newsomnomics”?
Prices are jumping with the minimum wage boost: Wendy’s 8%, Chipotle 7.5%, Starbucks 7%, and others like McDonalds will be announcing hikes soon. Fast food is a good with high elasticity (clientele is sensitive to price changes). So, they can only raise prices to the point when the loss of business begins to eat into the business model. Scott Roderick, a McDonald’s franchisee, said, “I can’t charge $20 for Happy Meals.” If he doesn’t, and economically can’t, he may have to close shop. How many then will join the ranks of the “real” minimum wage?
An economist at the Employment Policies Institute, Rebekah Paxton, lays out more carnage as the fever for $20 spreads to the other surviving remnants of the state’s shrinking private sector (see #2 below). The neo-Marxist SEIU is chomping at the bit to ruin other businesses in the state. West Hollywood is a microcosm of the elected lunacy gripping the state. Making their SEIU donors happy, the city proclaimed a $17.64 minimum wage for hotel workers. The union used this leverage to make it apply everywhere in the city. Currently, the “nominal” minimum wage stands at $19.08.
Predictably, many formerly joyous workers in the city are discovering that their services are no longer needed. Staff cuts of 30-40% are routine. 85 businesses in the city were shuttered last year. The 30-40% are back to $0.
Since Biden and the poohbahs of the donkey party are keen to hitch the nation to the California train, expect more of us across the nation to suffer, even those of us who fled the People’s Republic. Nationalizing lunacy is their chief aim. When will they learn that you can’t suspend the laws of nature, and the laws of economics that rise from them?
RogerG
Sources:
1. “California Loses Nearly 10,000 Fast-Food Jobs After $20 Minimum Wage Signed Last Fall”, Lee E. Ohanian, The Independent Institute, 4/26/2024, at https://www.independent.org/news/article.asp?id=14919&utm_source=FFF+Daily&utm_campaign=252dd0222c-FFF+Daily+2024-05-04&utm_medium=email&utm_term=0_1139d80dff-252dd0222c-318121705
2. “California’s Predictably Disastrous Minimum-Wage Hikes”, Rebekah Paxton, National Review, 5/7/2024, at https://www.nationalreview.com/2024/05/californias-predictably-disastrous-minimum-wage-hikes/