Today is a day that ends in y, so the state of California is doing something wildly counterproductive. Gov. Gavin Newsom, a Democrat, just signed into law a $20 minimum wage that specifically applies to fast food workers.
“California is home to more than 500,000 fast-food workers who — for decades — have been fighting for higher wages and better working conditions,” he said. “Today, we take one step closer to fairer wages, safer and healthier working conditions, and better training by giving hardworking fast-food workers a stronger voice and seat at the table.”
There’s just one problem. While we all want workers to earn more, good intentions don’t guarantee good results. This socialist policy will inevitably bring about unintended consequences and hurt the very workers it’s intended to help.
For one, this kind of policy financially incentivizes fast-food companies to speed up their investment in automation. Over the last few years, many Americans, myself included, have been to McDonald’s and used touch screens to place our own orders instead of interacting with cashiers. Well, the more arbitrarily expensive you make human labor, the more companies are incentivized to hurry up and embrace automation.
More fundamentally, this new legal minimum wage doesn’t change the reality that the real minimum wage is always zero: It’s unemployment.
While you can legally mandate that fast food employees be paid $20 or more, you can’t force employers to employ people. Yet many minimum wage employees do not produce $20 an hour in value for their employers. They might produce $14 or $15 an hour in value, and therefore, it’s worth it for employers to hire them at $13 an hour. But if the only option is to employ them at $20 an hour, they’re not going to do that; it would mean losing money.
So, there are untold thousands of Californians who won’t be employed — who otherwise would’ve been — all thanks to this new policy. Thanks, Gavin Newsom.
What’s more, to whatever extent fast food companies will be forced to employ overpriced labor under these new California rules, customers will end up bearing the brunt of the costs incurred as a result. After all, it’s just basic economics that when companies face an increase in production costs, their prices go up.
One study examining McDonald’s found that nearly 100% of the costs from increased minimum wages were “passed on” to consumers in the form of higher menu prices. Remember, what really matters is not the number on your paycheck but what that paycheck can buy you. So, you’re not actually helping the working class by artificially mandating a higher wage if it results in the things they purchase all becoming more expensive, too.
It’s great politics, though. By enacting this law, Newsom and his Democratic allies can take a victory lap and seem like they are sympathetic to hard-working hourly laborers even while it quietly backfires and eventually leaves those workers worse off. And if that’s not progressivism in a nutshell, I don’t know what is.
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