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California Unemployment Spikes Amid New Minimum Wage Law

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A graphical representation of new minimum wage law

California Unemployment Spikes Amid New Minimum Wage Law

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California’s unemployment spiked in the past week amid ongoing changes seen in the state’s workforce. New government data has shown that the state has seen a surge in people filing for unemployment benefits, a trend that could continue into the near future.

While California isn’t alone in seeing more people unemployed recently, the state’s unique position after passing a minimum wage law for fast food workers has made certain that the unemployment rate will only keep rising throughout the Golden State.

Unemployment Rises in California

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According to the Department of Labor, California saw an increase in unemployment benefits the week ending on March 30, 2024.

This data revealed that jobless claims increased by 2,147. When compared to other states in the country, California’s surge in jobless claims is the largest in the United States.

Job Losses in California

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There are many reasons why more people may have filed for unemployment benefits in these past few weeks in California, as the state has seen some massive changes in its workforce.

Data has shown that job losses have been high in the construction sector throughout the Golden State. About 9,600 jobs were cut in this industry.

A Wobbly Labor Market

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Compared to other states in the U.S., California’s labor market remains rather wobbly. Even though it has recovered since the COVID-19 pandemic, the labor market has yet to return to pre-pandemic levels.

As a result, California has the highest unemployment rate in the country at 5.3%. Though this is much lower than the 16% the state saw during the pandemic, it’s still a ways from the pre-pandemic rate of 4.4%.

An Increase in Unemployment

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Unfortunately, California has seen an increase in unemployment in 2024, even before this latest data confirmed that more people were filing for unemployment benefits.

In February, its unemployment rate rose from 5.2% to 5.3%, according to the Bureau of Labor Statistics. Compared to the national average of 3.9%, this high unemployment rate has seemingly been an issue for the state since the beginning of the year.

New Minimum Wage Law

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Many analysts have warned that California’s unemployment will likely rise shortly, thanks to the passing of the state’s new fast food minimum wage law.

According to this new legislation, fast food workers throughout the state will now earn$20 an hour, at the minimum.

Job Cuts

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Before the new minimum wage law went into effect in April 2024, many fast-food establishments were claiming that they would have to cut jobs to try to deal with increasing what they pay their employees.

Pizzerias like Pizza Hut were the first to lay off workers, specifically delivery drivers. These eateries claimed that they had to do this because of the new law.

A Continued Increase in Unemployment

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Analysts remain worried that more layoffs in the fast-food sector could occur as restaurants struggle to find ways to work under this new legislation. Already, unemployment has risen in the state thanks to other industries, such as the construction sector.

If fast food layoffs begin to occur at a greater number, then the weekly jobless claims in California may only continue to rise.

Supporting Fast Food Workers

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The new minimum wage law was created by the California government as it tried to help many fast food workers throughout the state who hadn’t seen a wage increase in many years.

When the wage increase was first announced, California Governor Gavin Newsom explained, “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.”

Support For the Law

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The new law has many critics throughout the state, both from conservatives and small business circles. However, there are many supporters of the law.

Many who work in the fast food industry have welcomed the higher wages. While some analysts believe the law will only harm the restaurant industry, others believe these issues will eventually iron out the longer the law is in place and the more fast-food eateries get used to it.

Mutually Beneficial?

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Though critics have claimed that this law will cause more layoffs and so far, these detractors have data to back this up. Supporters have stated this law is mutually beneficial for employers and employees.

“Higher wages and better workplaces benefit both workers and employers. In recent years, corporate profits in the fast-food industry have soared while wages have stayed the same,” a Newsom spokesperson said.

Other States Struggling With High Unemployment

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California isn’t alone in seeing an uptick in jobless claim filings. According to this latest Department of Labor report, Pennsylvania also saw an increase with a rise of 1,913 new claims.

However, even though these states did see a spike in unemployment recently, the unemployment rate seen across the country has declined by 11,000.

Customers are Increasingly Frustrated at the Rising Cost of Fast-Food

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Fast-food chains have been hiking up their prices, citing reasons like increasing food costs, labor shortages, and even global events.

As a result, customers are starting to shy away from their usual quick eats, turning instead to either home-cooked meals or dine-in restaurants that seem to offer more for their money.