The harsh realities of California's new minimum wage law set in — leaving Pizza Hut delivery drivers, customers on the hook

More than 1,200 Pizza Hunt delivery drivers in California will be laid off next year, and they have state lawmakers to thank.

In September, Gov. Gavin Newsom (D) signed into law a bill forcing national fast-food chains that operate in California to pay their employees a minimum of $20 per hour, effective April 1, 2024. That's a significant increase from the state-mandated minimum wage of $16 per hour, which will take effect on Jan. 1, 2024.

Labor groups and Democrats praised the law and claimed it will protect fast-food workers. But the negative consequences of the law are already being felt.

Two major Pizza Hut operators — PacPizza LLC and Southern California Pizza Co., along with their affiliates — have filed documents informing the government of their plans to lay off their delivery drivers as part of a broader plan to eliminate their in-house delivery services, Business Insider reported. The franchisees operate stores across California.

Ultimately, more than 1,200 delivery drivers will lose their jobs.

Now, customers who want delivery from the impacted restaurants will be forced to use third-party apps — like DoorDash, GrubHub, and Uber Eats — to order their Pizza Hut delivery.

This means that customers will pay more overall for their pizza because of the fees associated with the apps.

The unfortunate news demonstrates one of the key problems with government-mandated minimum wage increases: Business owners do not absorb the increased cost of labor.

In the case of these Pizza Hut operators, they are decreasing the size of their workforce to pay for the forced increase of labor. The second option is to pass the increased cost of labor to consumers. That is exactly what McDonald's and Chipotle are doing. After the bill became law, both fast-food chains said they will increase menu prices to offset the forced increase in employee wages.

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