Democrats in California have acted in “mafia-like fashion” with a new bill that “extorts fast-food businesses to do their bidding,” the Wall Street Journal’s editorial board wrote on Sunday.
The editorial board accused the state’s Democratic Governor Gavin Newsom of acting like an “authoritarian” for supporting a move by his party and labor unions that gives the state greater authority to regulate the industry. Under a new deal struck by the governor’s office, fast food restaurants, with some exceptions, must adopt a $20/hr minimum wage for workers starting next year.
The deal was reached after the fast food industry moved to put a referendum on the 2024 ballot to overturn a law Newsom signed last year. The landmark bill created a state-run council license to regulate wages, benefits and working conditions for fast food restaurants and increased the state’s minimum wage to a maximum of $22 an hour.
“But in mafia-like fashion, Democrats retaliated and threatened more punishment if fast-food restaurants didn’t drop the referendum,” the board wrote.
Democrats threatened “to hold franchisors jointly liable for alleged labor violations of franchisees,” and revive “a long-dormant Industrial Welfare Commission (IWC) with sweeping authority to set wages, hours and working conditions across all industries, not only fast food,” in response, the Journal recounted.
Under threat of going out of business, California fast food restaurants were forced to back off and negotiate a deal with Newsom and the labor unions. “They had a choice of being shot point-blank, or in the back while on the run,” the board wrote.
California already offers one of the highest minimum wages in the country at $15.50 an hour. The deal reached last week was approved by the state senate and requires fast-food businesses to offer a $20 minimum wage to workers. The state fast-food council will also be replaced by a board with four representatives from the fast-food industry, four from the workers’ side and one neutral party who will serve as chair, CNBC reported.
The WSJ warned this deal could raise costs for consumers in a state that’s already struggling financially with a $32 billion budget deficit and 4.6% unemployment rate.
They cited an analysis by Oxford Economics warning the spike in minimum wage is projected to cost 5,100 fast food jobs and put 300 shops out of business.
The fast food industry will not be the only one affected by this push for higher wages. This trend would force other industries to raise pay to attract workers, the WSJ argued, which would threaten small businesses.
While Democrats like Newsom frequently accuse their political opponents of threatening democracy, the board suggested Newsom and his party were functionally behaving as “authoritarians,” through these bills which give them broad power over these businesses.
“Mr. Newsom recently called Florida Gov. Ron DeSantis “functionally authoritarian.” But who’s the real authoritarian? Mr. Newsom’s deal gives him sweeping powers to regulate the fast-food industry,” they wrote.
In May, Newsom announced the state’s budget deficit had grown to $10 billion more than he expected at the beginning of the year. One study found California received less income tax than expected, as wealthy residents fled the state.
MyEListing.com, an online real estate portal, conducted a study of IRS migration data and found that California lost more than $340 million in 2021 IRS tax revenue due to residents moving.
The WSJ article argued Democrats’ strict control on businesses was one reason why many residents and business owners were leaving the state.
“Unemployment in California has crept up to 4.6%—the second highest in the country after Nevada—from 3.8% last July. One reason is businesses are leaving for states where they don’t have to worry about getting extorted by the Democratic union machine for daring to ask voters to override the Legislature. Democracy withers in this one-party state,” the scathing editorial concluded.
Newsom’s office did not return a request for comment on the WSJ’s criticism.
A McDonald’s franchise group blasted the Democrats’ fast food bill as “draconian” in a memo distributed to its members last week.
The advocacy group, which represents more than 1,000 McDonald’s franchisees, said the newly amended AB 1228 legislation will cause a “devastating financial blow” to their restaurants in the state by costing each location $250,000 annually.
“These costs simply cannot be absorbed by the current business model,” the National Owners Association wrote.
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Fox Business’ Aislinn Murphy and Fox News’ Aaron Kliegman contributed to this article.