Gavin Newsom's fast-food fumble

On September 5, California Governor Gavin Newsom lent his hearty endorsement to California’s FAST Recovery Act (short for Fast Food Accountability and Standards Recovery Act), which has been widely praised—and chastised—for its intention to raise minimum wages for the industry from $15 to as much as $22 per hour, the highest in the nation, with further increases in the offing. The major discussion over this new law has been directed to the perennial question of whether the loss in employment from its adoption will more than offset the salary gains to the workers able to maintain their positions within the industry. That is not likely, in my view, given the huge jump in mandated wages, which will make for a difficult transition period.

In dealing with this peculiar calculus, moreover, the inevitable losses in industry profits are given little or no weight in the economic evaluation of the law, on the implicit assumption that while the wage increases may put a dent in firm earnings, they will not drive all fast-food providers into bankruptcy—high-end operations are likely to be better able to weather the storm. It is also assumed that any increase in prices passed on to consumers will be borne with good grace, though many customers of the fast-food industry have marginal wage and income profiles not all that different from the workers (or at least those who retain their jobs) inside the industry. …

The opponents of the FAST Recovery Act should think hard before declining to pursue constitutional and statutory challenges of the new law. The conventional wisdom on this subject is that the landmark New Deal constitutional decisions have left state legislatures with broad power to impose wage and hour restrictions on various businesses. But even in the most basic terms, those decisions do not give state legislatures carte blanche.