Pizza Hut is forced to lay off delivery drivers due to minimum wage increase

On September 28, Gavin Newsom's California announced an increase in the minimum wage for fast food workers, which will be $20 an hour. However, days before the measure comes into effect, a famous fast-food pizza restaurant announced the dismissal of staff members, given that their productivity is below the new minimum wage established by the Democratic Administration.

"California is home to more than 500,000 fast-food workers who – for decades – have been fighting for higher wages and better working conditions. Today, we take one step closer to fairer wages, safer and healthier working conditions, and better training by giving hardworking fast-food workers a stronger voice and seat at the table," the Democratic governor celebrated when he signed the legislation.

The move did not sit well with Pizza Hut, a national restaurant chain based in Los Angeles, Orange, San Bernardino, Riverside and Ventura counties.

"PacPizza, LLC, operating as Pizza Hut, has made a business decision to eliminate first-party delivery services and, as a result, the elimination of all delivery driver positions," they announced from the restaurant, as reported by Business Insider.

The announcements were given in anticipation of the entry into force of the new minimum wage of $20 an hour, which will take effect in the Golden State starting in April 2024.

What happens when the minimum wage increases?

According to the Spanish economist Juan Ramón Rallo, who is also a teacher and author of several books, "the result when these types of policies are applied is quite different from what is intended" since "increasing the minimum wage can condemn employees to the worst possible scenario: unemployment."

In his explanation for Visualpolitik, Rallo explained that the increase in the minimum wage harms those who have lower productivity in the market, such as young people or those who offer certain types of lower productivity services, given that they have a higher probability of being fired in these scenarios, precisely what happened with the Pizza Hut employees in California.

"Raising the minimum wage is the quintessential proposal of populist politicians and a way by which the majority of the population is normally deceived and harmed, although particularly the poorest," Rallo said.