Fast-food Restaurants’ Future Now in the Hands of California Voters

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The controversial fast-food labor law, AB 257, was signed into a law just last week by Governor Newsom. AB 257, also known as the Fast Recovery Act, will see a new government-appointed body set industry standards on wages and working hours among other things for fast-food workers in California.

However, just a day after Newsom signed the Fast Recovery Act into law, opponents filed a referendum with the California Attorney General’s office seeking to overturn the law.  While signatures are being collected, implementation of the bill will be postponed.  If proponents collect the required number of signatures, the proposal would be put on hold until voters can weigh in during the November 2024 election.

The Fast Food Council created by AB 257 is to be given unprecedented authority to create its own labor and employment laws. It will be up to voters to decide whether they are OK with a small group of unelected political appointees being empowered to make these sweeping decisions impacting franchises and jobs and leaving lawmakers without a say.

The Fast Recovery Act will be both financially detrimental to the workers it claims to benefit and fast-food consumers who are still struggling economically. Although the state has for the most part recovered financially from the sweeping job losses and reduced working hours of the COVID-19 pandemic, the financial picture is still not what it was back in 2019 for many Californians. Beacon Economics and the UCR School of Business Center for Economic Forecasting and Development wrote in an analysis, “California’s unemployment rate remains elevated relative to the 3.8% rate in the United States overall as the state continues to struggle with its labor supply. Since February 2020, the state’s workforce has fallen by 455,000 workers, a 2.3% decline.”

While lawmakers attempt to assist struggling Californians with political sideshows such as the federal Inflation Reduction Act that won’t lower inflation, they are simultaneously passing legislation that will continue to increase food costs in an already expensive state.

A report by Chris Thornberg of the UC Riverside School of Business’ Center for Economic Forecasting and Development forecasts a food price increase of 7% if the council were to approve a minimum wage increase of $22/hour. Food prices aside, increasing hourly salary does indeed benefit the workers who keep their jobs. However, the higher costs of labor will cause some workers will inevitably  lose their jobs as franchisees struggle to keep up with rising labor costs.

The initial thought for who this legislation will impact are large corporations with financial cushion that would certainly be able to afford paying their workers $22 per hour, such as McDonalds or Subway. However, this bill will also impact coffee shops, ice cream parlors, taquerias, and more who employ hundreds of workers and serve thousands in their communities.

After the immense regulations and shutdowns restaurants had to face in the COVID-19 pandemic shutdowns and executive orders, they are now being singled out yet again with more rules, regulations and costs that will inevitably be passed on to consumers. Consider that 43% of Californians with children in the household reported in a Public Policy Institute of California survey that they have suffered serious hardship due to price increases. The last thing they want are higher prices at their favorite neighborhood restaurant.

At a time when inflation and cost of living is at an all-time high in California, it is concerning that lawmakers respond by saying one thing and doing another with legislation that increases costs and obstructs the restaurant industry.

CA Attorney General Bonta’s office will have the title and summary of the referendum by mid-September.  Opponents will then have until April 1 to collect about 623,000 signatures (5% of the total number of votes in the last gubernatorial election) to quality for the 2024 ballot. Out-of-touch lawmakers have already had their say; it is now time for California voters to make their voices heard on the future of this irresponsible new law.

Emily Humpal is deputy communications director at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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