One of the major concerns about the spike in inflation is the stagnant wage growth in the United States, placing citizens in financial trouble as family budgets can’t keep up with rising costs. There are many trade-offs in today’s economic climate regarding wage hikes, and we can explore a lot of them with California’s latest bill.
On Labor Day, bold governor Gavin Newsom signed the FAST Recovery Act, which would increase wages for fast food workers to as much as $22 per hour by the next year. A council will now be created to decide new minimum wage standards that will further deviate from the national minimum wage of $7.25 per hour, and this adds to California’s state-wide moves that continue to make it unique from other states. Labor groups across the country praised the legislation, calling it a massive step for worker empowerment and an example for the rest of the country. There are currently about 500,000 fast food workers in the state, and it’ll help them cope with the high cost of living that plagues California and has caused many to move out to other states.
The mass migration of California residents comes with the high number of businesses moving with them, as they believe the economic benefits are much higher in states like Texas. California is known to have high tax rates and Southern economic hubs are in red-leaning states that don’t have a state income tax. This new bill did nothing to encourage the stay of businesses as major fast-food chains were lobbying against the passage of this bill. Increased wages means higher labor costs for companies, and in their eyes it’s an unnecessary additional expense they can’t take. Chains and restaurants are being forced to transition into this new minimum wage system by next year, forcing them to make tough decisions. Especially for small restaurant chains which might be forced to eliminate other labor costs to compensate, placing additional stress that some can’t take at this point in time.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.