When fast food restaurants across California have to start paying workers $20 per hour on April 1, one major chain will be exempted from the mandate—and it just so happens to have a connection to a longtime friend and donor to Gov. Gavin Newsom.
Panera Bread is poised to get a boost from a bizarre clause in the fast-food minimum wage law that exempts “chains that bake bread and sell it as a standalone item,” Bloomberg reports, adding that “Newsom pushed for that break, according to people familiar with the matter.”
This is from Eric Boehm, “Why Is Panera Exempted From California’s New Minimum Wage Law?” Reason, February 28, 2024.
And Newsom kind of admits, in his sleazy way, that he did a friend a favor:
Asked directly about the bakery exemption at a press conference last year, Newsom said it was “part of the sausage making” of the legislative process. “We went back and forth, and it was part of the negotiation,” he added.
Fortunately, Bloomberg was on it:
Bloomberg‘s reporting suggests it was something Newsom sought in those negotiations: The bakery carve-out “was adopted as a means of winning the governor’s support for the legislation, said a person with knowledge of the discussions. The rationale was the governor’s longstanding relationship with a Panera franchisee, the person said.”
READER COMMENTS
Ben Y
Feb 28 2024 at 6:58pm
Watch the law of unintended consequences kick in with every establishment suddenly offering fresh bread.
Richard W Fulmer
Feb 28 2024 at 7:38pm
No doubt we’ll need state regulations specifying what constitutes “fresh bread.” For example, do soft, giant pretzels count? How about biscuits such as those that McDonalds, Popeye’s, Chik-fil-A, Hardee’s, and Carl’s Jr. serve?
David Henderson
Feb 28 2024 at 7:49pm
I thought of that–but so did they.
A company had to be producing bread for sale separately on or earlier than September 2023.
Ben Y
Feb 28 2024 at 9:40pm
Small bakeries are now hot commodities in California, being especially suitable for reverse mergers.
john hare
Feb 29 2024 at 4:28am
And bakeries start selling hamburgers and tacos??
MarkW
Feb 29 2024 at 6:13am
Pretty much every bagel shop already sells ‘bagel sandwiches’ of some sort or other. It wouldn’t take much for them to leverage their new-found labor cost advantage into a wider array of offerings. It looks like Einstein bagels already has a couple of dozen CA locations. And the grandfathering seems to be for companies, not just particular locations, so it sound like a great expansion opportunity.
Andrew
Feb 28 2024 at 9:41pm
Anyone for a Raines Loaf?
David Seltzer
Feb 29 2024 at 9:03am
Anthony de Jasay: The political actor, Gavin Newsom, seeks power by rewarding his client, Panera, with an exemption from the $20 an hour minimum wage. The expense falls on the consumers, employers and employees of the those firms forced to pay the new minimum wage. Methinks the sausage is a bit rancid.
Richard W Fulmer
Feb 29 2024 at 11:03am
But progressives tell us that high minimum wages are good for business; they create incentives for employees to work harder and smarter. So, Newsom’s exemption is actually hurting Panera! This will be a great test of progressive economic theory.
David Seltzer
Feb 29 2024 at 11:47am
Richard, but…but employers work smarter and harder as well. Shortly, McDonald’s will have one employee monitoring Robby the Robot flipping burgers, ala Walmart and Costco.
Jose Pablo
Feb 29 2024 at 7:39pm
This could end up not being a good thing for Panera. The “worst” (less productive) workers would end up working for Panera (well the worst workers would end up jobless, but the “next worst ones” …).
The job rotation would be, very likely, higher, too (and higher than the fast-food industry average is pretty high).
As a “natural experiment” the exemption is an interesting opportunity for applied econometrics.
Kevin Corcoran
Feb 29 2024 at 10:39am
You beat me to it – I was also writing up a post about the same story! Instead of another post, I’ll just add a comment here including a couple of extra elements I thought was interesting from the story I saw describing this whole episode.
Richard Fulmer wonders about how regulations related to this law will go about “specifying what constitutes ‘fresh bread.’ For example, do soft, giant pretzels count? How about biscuits such as those that McDonalds, Popeye’s, Chik-fil-A, Hardee’s, and Carl’s Jr. serve?” It turns out that this law specifies that items like bagels and croissants don’t count as bread, meaning that coffee shops and cafes that sell these items will not get the same exemption Panera will be getting.
Another point I thought was interesting reminded me of Nancy Pelosi’s infamous statement about Obamacare that “We have to pass the bill so that you can find out what is in it.” In this case as well, it seems that the ostensible lead author of the bill didn’t actually know what the bill contained:
The story also shows how these kinds of political shenanigans only serve to inspire more shenanigans. The more people see Panera benefit from rent-seeking, the more people will begin to engage in rent-seeking themselves:
Richard W Fulmer
Feb 29 2024 at 11:09am
Law makers are getting smarter.
The morals of this story are:
1-Legislators are for sale.
2-Money spent in Sacramento and Washington D.C. provides far better returns than does money spent on R&D.
Kevin Corcoran
Feb 29 2024 at 11:42am
As P.J. O’Rourke said, when what is bought and sold is controlled by legislation, the first thing for sale will be the legislators.
Richard W Fulmer
Feb 29 2024 at 2:54pm
Nice!
Floccina
Feb 29 2024 at 4:42pm
It’s funny but it might be good. At least the worst workers can get a job somewhere. Wink
Steve
Feb 29 2024 at 5:22pm
The interesting thing will be to see what kind of employees Panera gets. Who would work there for $15 if they can go across the street and get $20.
My guess is Panera eventually will have to pay the $20 voluntarily in order to recruit and retain their employees.
Jon Murphy
Feb 29 2024 at 6:31pm
I doubt it. Recall that a minimum wage is a price floor. That means (assuming it’s binding), there will be a surplus of workers on the market (unemployment). It would be true that Panera would have a hard time hiring at $15 if the next best option is $20. But that’s not the relevant comparison. Thanks to minimum wage, there will be workers whose next best option is $0. Those $20 jobs will all be taken.
Steve
Mar 1 2024 at 7:47pm
Completely true in the short term, and I don’t doubt that they could always find employees. However, there’s enough employee turnover in that business that the Panera employees would soon be able to move up to the $20/hour positions, provided they’re not clearly undesirable.
In short, they can always get open positions filled, but with the consequence of much higher turnover and an overall lower quality of employees. That’s a high price to pay in the service business.
Moot point now, though, as Newsome folded, but would have been an interesting experiment.
Jon Murphy
Mar 1 2024 at 11:54pm
No. With a minimum wage, there won’t be high turnover because it’s a price floor. People won’t leave because the $20 job is better than the alternative.
Jon Murphy
Mar 1 2024 at 11:56pm
In fact, I should point out one of the arguments for a minimum wage is that it reduces turnover.
Craig
Mar 5 2024 at 10:14am
Well he’s saying Panera’s workers will look to get into McDonalds. And if Panera doesn’t match McDs. Bk, Wendys et al Panera will have higher turnover than they do today. In any event turnover in places like Disney is 30-40% and they’re over $20 in FL. Walmart over 100%. Indeed perhaps MW lowers turnover rate a bit but you’re going from very, very, very high to very high. Indeed the turnover rate itself suggests MW laws not needed. Shows workers basically move on to greener pastures.
Daniel B
Mar 1 2024 at 8:47pm
Is it just me or did anyone else think of a quote attributed to Otto von Bismarck: “Laws are like sausages. Better not to see them being made” after reading this story?
I’m not sure if Newsom is blatantly referring to that or is simply being unintentional about it but either way it seems clear that power (to get exemptions, for example) is for sale. It’s ironic. Some people claim capitalism “commodifies” things and then proceed to commodify the government by advocating for increased government power, which only encourages rent-seeking (it pays more to have power used in your favor when there is more power at stake to be used).
Comments are closed.