Talk of tariffs is all over the news, with President Trump slapping them on imports from Canada, Mexico, the EU, and China. Most Americans understand that tariffs can drive up prices. But what they don’t see is that a tariff isn’t just a tax on foreign goods, it’s any artificial cost imposed on a market, in other words it’s a tax. Take California’s minimum wage hike to $20 an hour for fast food workers, rolled out on April 1, 2024. By jacking up the cost of labor, the state has effectively placed a tariff on its own workforce. The fallout? Higher prices, struggling burger joints, and fewer jobs.
Why call it a ‘tariff on labor’? Because just like tariffs on steel or cars burden importers, a mandated wage increase burdens employers, especially in labor-heavy industries like fast food. The result is businesses either raise prices to cover the cost, cut hours and jobs, or watch their profits evaporate. In California, fast food restaurants are really feeling the heat. A Washington Times editorial highlights that the Bureau of Labor Statistics shows a 0.2 percent increase in unemployment in the fast-food industry since the wage hike kicked in. It’s not a tidal wave, but a clear sign the tariff’s squeezing workers out
For employees, this ‘tariff’ is a double-edged sword. Some might see a bigger paycheck, if they keep their job. But it’s not the whole story. Chains like Wendy’s are slashing hours to offset the cost, this leaves employees with less take-home pay despite the higher rate. Customer’s aren’t happy either.
Customers are the other big losers in the change. The Berkeley Research Group created an index of menu pricing to compare California’s change against neighboring states. The net result was a 14.5% spike in prices in the Golden State — almost double the inflation elsewhere.
Washington Times
According to industry reports, over 1,000 restaurants have shuttered since the wage hike hit.
People blame tariffs on imported goods for hiking prices and killing jobs. People should turn that same skepticism on minimum wage laws which are tariffs on labor. The concepts are analogous, both pile costs on businesses, squeeze profits, and can inflate prices. California’s ill conceived experiment proves it. Place tariffs on labor, and you won’t just see pricier fries or fewer hours available to employees. You attack a company’s profitability and watch over 1,000 eateries close their doors. It’s time people understand this is a tax dressed up as a raise.
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