Is raising the minimum wage a good thing?
Published By
Mike Sorrentino
Published On
July 2023
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Late last year USA Today reported Pizza Hut is laying off more than 1,200 delivery drivers in California in response to the new minimum wage law. California's minimum wage is about to go up by $4. Fast-food workers in the state are set to get a pay bump of close to 30% in April as the minimum wages rise from $16 to $20 an hour.
The new law will affect 557,000 fast-food workers at 30,000 restaurants in California, customers will need to use third-party apps like DoorDash, GrubHub and Uber Eats for food deliveries at the affected chain restaurants. The trend of ordering off the 3rd party services seems to be higher prices for all.
A 2012 analysis of the New York State minimum wage increase from $5.15 to $6.75 per hour found a “20.2 to 21.8 percent reduction in the employment of younger less-educated individuals.”
In my experience the higher the labor cost is the more cutting of shifts and hours takes place. If sales are not going up but labor costs are…the quickest way to mitigate the issue is cust labor is other ways. The downside of that is now there are less bodies to use to serve the same volume of sales, not a good look. Another consequence could be restaurants raising regular prices.
The Wilson review noted: A 2004 “review of more than 20 minimum wage studies looking at price effects found that a 10 percent increase in the U.S. minimum wage raises food prices by up to 4 percent.”
People making more money is always a good thing. However, such a high minimum wage could have many unintended consequences. I don’t think Pizza Hut will be the only chain dealing with this. I also think there will be a lot of owners and managers coming up with new and creative ways to bring labor costs in line.