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California Governor Gavin Newsom has signed a bill called the “FAST Recovery Act” creating a state-level appointed council to effectively control the fast food industry. A royal burger and fries council, if you will. The stated goals of the council include pushing up wages and controlling other standards in the entire restaurant industry, but in fast food in particular — at least to start.
This unprecedented move is a head-scratcher in any environment, but particularly so after the stark outcomes from government COVID policy. The government-led picking of winners and losers, along with other policies that let a handful of people interfere in business in a historic manner, led to an unholy trinity of issues: a disrupted supply chain, a broken and under-supplied workforce, and rampant inflation.
Yet that isn’t stopping California, which is the incubator for many government-control ideas that often make their way to the national stage.
Of course, just about everyone wants companies to treat employees well and pay them fairly, but that is something that the market needs to sort out. And, in a time when most businesses are raising wages to compete for workers naturally, we don’t need artificial minimums that could engender bad outcomes.
Ultimately, many of those bad outcomes are entirely predictable. The minimum wage has a nasty history, rooted in keeping women and minorities out of the workforce. It does the same thing today.
Should this council push up fast food wages to the $22 minimum that is being kicked around, there are a few obvious results. In one scenario, fast food restaurants will replace labor with technology, such as ordering kiosks that are already popping up throughout the industry, which eliminate entry-level jobs and a stepping stone for new, low-skilled workers to enter the workforce and gain skills and training. Or, in some areas, the prices of fast food will get so high nobody will be able to afford it. Those businesses will shutter, and low-priced food options will be eliminated for those who can today afford them.
Additionally, as economic decisions in one industry spill into the rest of the economy, it will engender inflation elsewhere.
That’s part of the trick — politicians want you to have a higher headline wage, not caring about the purchasing power you are able to derive from your wages. Inflation is good for them, for their spending sprees, and for gaining control. Unfortunately, too many people are financially illiterate, so they don’t understand that they become worse off with higher wages if those wages purchase less.
But this state council’s impact is about more than just wages. It’s all about control and power. Having a board that is focused on one segment of one industry and has the ability to tell companies how to run their businesses is against every tenet of individual rights and freedoms.
What starts with fast food will ultimately spread to other restaurants and shutter more small businesses. What begins with a mandate regarding wages will ultimately see an expanded purview. It is not a stretch to imagine the council pushing ESG, not allowing more than a certain percentage of beef on menus, or more interference.California’s bad ideas impact the nation and often spread nationwide. Encourage those in the state to stand up against more socialism and central planning. Our country’s economic freedom and foundation are being eroded quickly with California as ground zero, and we need more people to say, “Enough!”
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Carol Roth is a recovering investment banker, the New York Times best-selling author of “You Will Own Nothing,” and a business adviser.