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IPFS News Link • California

No Fooling: Gov. Newsom's $20 Minimum Wage Hits April 1

•, by John Seiler

Last December, Pizza Hut announced it would lay off more than 1,200 delivery drivers across the state. It switched to independent deliver services for home delivery. On March 25, the Wall Street Journal reported on driver Michael Ojeda, 29, "who previously supported his mother and partner on his Pizza Hut delivery wages." He told the paper, "Pizza Hut was my career for nearly a decade and with little to no notice it was taken away."

Round Table Pizza also laid off 73 drivers. And, "In San Jose, Brian Hom, owner of two Vitality Bowls restaurants, now runs his stores with two employees, versus four workers that he typically used in the past. That means it takes longer to make customers' açaí bowls and other orders, and Hom said he is also raising prices by around 10 percent to help cover the increased labor costs. "

Mr. Hom said, "I'm definitely not going to hire anymore."

The $20 wage increase affects only chains with 60 or more restaurants nationwide. One effect might be to discourage national chains from setting up here. If a chain has, for example, 55 restaurants outside California, it would be hesitant to establish five restaurants in the Golden State because that would impact its wage structure everywhere else.

The $7.25 federal minimum wage applies in 20 states with no higher state wage. If a restaurant company operating in those states expanded to California, the disparity between $7.25 and $20 would be a shock to the company.

Another big effect will be on all other California businesses, not just restaurants with fewer than 60 operations nationwide. The state minimum wage overall went up fifty cents to $16 an hour on Jan. 1. The best workers at $16 will gravitate to the $20 jobs, effectively putting pressure on companies to pay more than $16. Companies that can't do so will go out of business.