California's New FAST Recovery Act Hurts More Than It Helps: Replacing Workers and Raising Food Prices (Part III).
FAST Recovery Act:
It hurts more than it helps.
As mentioned in Part I of this series, the FAST Recovery Act is simply a way for the state government to promise more money to employees (albeit private employers’ money) while private employers get nothing more in exchange. Well, to clarify, private employers get more rules, regulations, and rising costs in exchange- clearly, nothing more that they actually want.
How is it possible to get something for nothing? Well, it is not. The new law not only negatively affects the franchise employers, but they also negatively affect the fast food employees, their families, and all consumers as a whole.
The new law states that it intends to pay fast food restaurant workers “the necessary cost of proper living” and turns a blind eye to the actual cost to the employers. The phrase “the necessary cost of proper living” is vague and will begin at $22 an hour ($7 above current minimum wage in California). Currently, minimum wage in California is $15 an hour for employers with 26 or more employees. By next year, the same employers could be paying their employees a minimum wage as high as $22 an hour. According to California lawmakers, the current minimum wage laws do not cover the “necessary cost of proper living.” (The elephant in the room is the fact that inflation has only served to increase the “necessary cost of proper living,” and this is clearly not the fault of the franchise owners.)
What we have seen during the no-contact era of the COVID-19 pandemic has been the overnight rise of digital ordering and touchless pick-up service. In many fast food restaurants, we already have very little face to face time with employees during our food order and pick-up. With the rise in costs to the employers, it is likely we will see more automated food preparation equipment to replace the workers actually preparing the food. The new law purports to protect employees; however, the new law is now hastening the replacement of the employees it aimed to protect. The truth is: businesses will look for ways to cut costs and protect their bottom line and, because of the new law, it will be at the expense of its highest cost- the employees.
In addition to lost jobs due to automation, another looming issue that will ultimately affect the fast food workers (and their families) is the increase in costs for the food. A study recently put out by the UC Riverside School of Business states that if the “Council chooses to set minimum wages at the lower end of what is referred to as the ‘living wage’, now calculated at $22 to $43 depending on the number of dependent family members, it would raise labor costs … by over 60%.” Clearly, an increase in labor costs would result in an increase in food costs. If the employee’s wages increase by 20%, the restaurant food prices could increase by 7%. If the employee’s wages increase by 60%, the restaurant food prices could increase anywhere between 20%-22%. Yes, your cheeseburgers could be 22% more expensive. Ironically, the same study has found that the segment of the population who would be most affected by the increase in fast food prices are the same group that the FAST Recovery Act purports to help.
The latest rounds of wage increases has created massive inflation, which has resulted in a total purchasing power reduction. Likewise, while fast food workers may get a wage increase, that increase will result in less work and higher food bills, i.e. their money buys them less or purchasing power reduction. As for the employers, many franchise owners will now have a new boss, new rules, higher costs, and less control of the business in which they invested their money.