Labor Laws and Automation

California’s fast food workers will be earning more money as the state law requires fast food restaurants to pay a minimum wage of $20 an hour beginning this month. The Wall Street Journal reports that Pizza Hut has responded by laying off 1,200 drivers.

In an industry which is already suffering from labor shortages, making workers more expensive could result in fast food joints reducing the number of workers and expecting more from their employees. Or,  as an opinion piece in an Arizona news source suggests, it could lead to greater automation.

“California just made labor in fast food more expensive without adding any value. Meaning, it is welfare imposed on the free market and someone is going to pick up the tab,” wrote Phil Boas of the Arizona Republic. “It won’t be government.”

How much is too much?

Boas suggests that the work commonly done by fast food workers isn’t actually worth $20 an hour. Faced with the possibility of paying $41,600 a year (plus benefits) for someone to flip burgers, franchise owners may switch to Flippy.

Starbucks, Dominoes, and Chipotle are all announcing new automation efforts, and fast food robots are settling in across the nation. Both McDonald’s and Chipotle have also announced that they plan to raise their prices in California locations to adjust to the new increased costs.

Will consumers accept higher prices for fast food? Will they balk at robot service? Deloitte reports that 58% of patrons between the ages of 18 and 38 say they’d return to restaurants that use automation, and only 42% of customers over age 39 agree. Overall, that’s only about half of customers.

In the long run, it may come down to what the traffic will bear.

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