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California’s Unions Are Trying to Strangle Ronald McDonald

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Ronald McDonald with Rodolfo Oppenheimer. November 16, 2012. Photo courtesy of U.S. Embassy Uruguay

You won’t find a state any better at discouraging business than California. Unions are pushing the state’s legislature to craft new laws that will force parent companies to take responsibility for more of what franchisees do, leaving them less likely to build new franchises. It doesn’t take too much thought to see how this will hurt job creation. The Wall Street Journal reports:

Democrats claim fast-food restaurants pay “poverty wages,” and the legislation directs the council to “supply the necessary cost of proper living to fast food restaurant employees.” According to MIT, the “living wage” in California for single adults is $21.82 per hour. Workers can thank progressive policies for their sky-high energy and housing costs.

Restaurants that mistreat workers, or don’t pay enough to keep them, wouldn’t prosper for long, especially in today’s historically tight labor market. And statewide employment in fast-food and takeout dining is up 3.3% from pre-pandemic levels while overall jobs in leisure and hospitality are down 8.6%.

Beyond higher wages, the council could also require expansive health and fringe benefits such as paid vacation even for workers who don’t work full-time. It could even require restaurants to pay overtime to workers who log more than 30 hours a week instead of the 40 mandated by state law.

Franchisees would struggle to manage payroll costs since corporations often set price ranges for items. But note that the council’s powers would extend beyond pecuniary issues. For instance, the council could mandate disclosure of pay based on racial or gender categories. Unions will surely demand that business owners be required to let them into their restaurants to train, er, organize workers.

The bill would also deem corporations that operate on the franchise model to be joint-employers, so they would be on the hook for the labor violations of individual franchise operators. This would discourage companies like McDonald’s and Carl’s Jr. from offering new franchise agreements in the state, especially to entrepreneurs with little business experience. That may be the goal.

The Center for American Progress, which has endorsed California’s legislation, says the franchising model “tends to drive down labor standards” and the council’s “recommended standards can ensure that high-road firms that want to provide good wages and benefits are able to do so profitably and are not undercut by low-road companies providing poverty-level compensation.”

“High-road” firms? One guess about what it would take to meet that test—simply let the Service Employees International Union organize your workers. Arizona is looking better as a business alternative all the time.

Action Line: States outside of America’s Growth Corridors more often seem to be working against business than for it. Leaders in those states seem to want to harm businesses and suppress growth, even at the expense of residents. If you live in a state like that, you should look for a better America, today. Start with my Super States. If you are the kind of person who needs an extra push, click here to sign up for my free monthly Survive & Thrive letter, and I’ll motivate you to make the right decisions for you and your family, today.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.