Gov. Governor Gavin Newsom made national headlines again this month with his latest scandal. Per Bloomberg reports, Newsom gave Panera Bread an exemption to a new minimum wage law in California. Why? Because he went to highschool with the owner and didn’t want to see his buddy’s business tank.
Assembly Bill (AB) 1228 passed in 2023 and mandates that fast-food franchises with at least 60 national branches must pay a minimum wage of $20 dollars per hour to their employees. The law, however, had a very specific exemption for “chains that bake bread and sell it as a standalone item.”
Panera has 24 locations in California all owned by Gregg Flynn, Newsom’s friend and billionaire campaign donor. Newsom denies helping his friend out, though the Bloomberg article reports that he and Flynn have a long business relationship with each other, with Flynn apparently bragging to colleagues that he is on a texting basis with the governor.
While most commentary on the scandal has focused on calling out corruption and crony capitalism (which is fair), there’s also a clear economic angle to the story that should not be neglected: Newsom’s actions are a clear admission that minimum wage laws are bad for business.
If minimum wage laws are so great, why is the governor shielding his allies? If you really believe businesses really are exploiting the labor of less fortunate employees, then shouldn’t they all have to abide by minimum wage law, regardless of whether or not they’re a friend of the governor? Evidently, you’re only underpaying your employees if you’re a business Newsom doesn’t care about.
Like any good businessman, Flynn knew that this new law was going to do serious financial harm to the industry, and even, per the Bloomberg report, wrote an op-ed in 2022 about AB257, a California bill that placed labor relations in the fast food industry under the oversight of a regulatory council of government appointees.
In that op-ed he wrote about the importance of the franchise business model for the economy and how AB 257, “would effectively kill the franchise business model in the state – putting at risk the more than 75,000 local businesses and 728,000 jobs in our franchise sector.” Contrary to what most people think, fast food restaurants in California have small profit margins. Legislation like this can make or break a franchise, and Newsom, being aware of this, gave an exemption to both Flynn and the fast food labor unions.
This is not the first time proponents of a minimum wage have been caught in hypocrisy. During his campaign for the 2020 presidential election, Senator Bernie Sanders was reported to have paid his campaign employees less than $15.00 per hour, while he was advocating for a national minimum wage of $15.00 per hour. The employees complained about this inconsistency and when pressed on it, his campaign stated that they offered a competitive wage for their campaign employees — an admission that markets set better wages than the government can.
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In the end, the Sanders campaign raised the wages of their employees, but cut their hours in order to cover the costs of the higher wages. We can expect the same to happen to restaurants across California thanks to AB1228.
At the end of the day, the economics of minimum wage laws don’t add up. Newsom’s special treatment of his friends and political allies is a clear admission of that fact. For all the rhetoric of greedy businesses and helping struggling families, Newsom himself is a businessman as well. Voters should remember this story when the politicians propose raising the minimum wage again — probably sooner than we think.
David Mendoza is an educator at a classical school in California and a member of the Young Voices contributor program. He holds a B.A. from the Master’s College and an M.A. from Westminster Seminary California.