Wages are rising, the job market is tight, prices are surging. Across the country, voters are calling on government to rein in inflation. But in Sacramento, lawmakers seem to have missed the message. Rather than trying to bring down prices, they’re poised to pass the “FAST Recovery Act,” a new bill regulating employment in the fast-food industry. The bill openly aims to raise the industry’s labor costs, which its supporters say is necessary to give workers a “proper living.” But those cost increases will fall first on lower-income consumers, who increasingly rely on fast food for their meals. And eventually, the increases will fall on the workers themselves, who may soon be looking for new jobs.
A pet project of the Service Employees International Union (SEIU), the FAST Act was passed by the California Assembly in January. It was then voted out of the Senate appropriations committee last week. Now, it needs only a full Senate vote and the governor’s signature. If it gets both, as it probably will, it will create a new “Fast Food Sector Council.” This thirteen-member body will include representatives from government, industry, and worker “advocates” (read: unions). The Council will set minimum wages, hours, and working conditions for all fast-food restaurants. Its new standards will apply across the industry, just as if they were laws themselves.
The bill is notable, and concerning, for three reasons. First, it marks a step toward so-called sectoral bargaining. Sectoral bargaining is a system that lets unions bargain with employers on an industry-wide basis. The resulting agreement binds every employer in the sector. And because the same agreement applies to everyone, wages and working conditions vary little from workplace to workplace. Everyone has the same union and the same basic terms. For that reason, pro-labor academics like Kate Andrias, Ben Sachs, and David Madland have pushed sectoral bargaining as a solution for declining union-membership rates. And for their part, unions love the idea. It gives them industry-wide leverage without the hard work of recruiting new members.
Inconveniently for them, sectoral bargaining isn’t possible under existing law. Sectoral bargaining is fairly common in Europe, where national labor laws favor industry- and regional-level agreements. But in the United States, labor relations are governed by the National Labor Relations Act (NLRA), which favors workplace-level (i.e., “enterprise”) bargaining. The NLRA requires workers in a bargaining unit to share a “community of interest,” and it assumes that workers share a community of interest in a single workplace. That means unions generally have to organize new members shop by shop. And because the NLRA preempts inconsistent state laws, states can’t easily implement a different scheme.
As a result, the FAST Act can’t quite implement sectoral bargaining. Instead, it takes a half step. Its new “Sectoral Council” does include representatives from labor and management, and these representatives do help negotiate industry-wide standards. But a majority of the Council’s members come from state agencies. More important, the Council is chaired by the state secretary of labor, who has to approve any new standard. That means the secretary has effective veto power. So in effect, the Council works more like a government agency than a bargaining committee. It inches toward sectoral bargaining, but it doesn’t quite get there.
Even so, it will no doubt feed the clamor for real sectoral bargaining. Regardless of the real-world results, sectoral bargaining’s champions will say the FAST Act proves that sectoral schemes can work in the United States. The Act will thus spur similar laws elsewhere. And other states may push the envelope toward sectoral bargaining even further, as some have already done for workers not covered by the NLRA. (Illinois and Washington, for example, already have quasi-sectoral bargaining for homecare workers.)
That push, ironically, will come at an awkward political moment—which brings us to the second concern. While the supporters of sectoral bargaining want to centralize decisionmaking, progressives at the federal level have been pushing in the opposite direction. In recent months, the Biden administration has been arguing that labor markets are too consolidated. It claims that there are too many big, powerful employers, and these employers are using their market power to abuse workers. It also claims that even in quasi-competitive markets, employers are tacitly coordinating to fix wages. It has thus filed criminal complaints against companies and executives for doing as little as sharing information. It has also signaled that it will weigh labor-market competitiveness in its new federal merger-review guidelines.
The administration’s arguments look increasingly shaky in today’s job market, where Americans are seeing fast wage gains, low unemployment, and record churn. But whatever their empirical merits, the arguments are hard to square with the FAST Act. While the administration argues that we should prevent consolidation and foster competition, the FAST Act assumes that we have too many small employers with too many different standards. It forces those employers to coordinate and implement a one-size-fits-all solution. It effectively eliminates competition over wages, hours, and working conditions. The result is a dissonance in public policy bordering on incoherence.
But even more jarring than the policy incoherence is the third reason for concern: the economic context. The FAST Act comes as Californians, like all Americans, are facing record inflation. Prices are rising for nearly everything, but especially for food. Grocery prices jumped 13.1% in July, putting them on pace for the fastest annual increase since 1981. Comparatively, restaurant prices rose slowly, up only 7.6% in the same period. This differential has driven many people out of their kitchens and into fast-food restaurants. Restaurant chains are reporting more and more business from customers in households earning less than $75,000 a year.
But that trend may end with the FAST Act. Keep in mind, restaurant prices have risen more slowly than grocery prices only because they have different inputs. While grocery prices more closely track the price of commodities, like wheat and canola oil, a larger portion of restaurant prices comes from labor. And if nothing else, the FAST Act will raise labor costs. It will force wage increases and administrative burdens onto restaurants. And those restaurants will inevitably pass the new costs on to their customers. California consumers will thus face higher restaurant bills and tougher choices about how to stretch their food budgets.
True, restaurants don’t have to respond by raising their prices. They could instead offset higher labor costs by investing in labor-saving technologies, like self-checkout machines. But those investments take time to bear fruit. And besides, they won’t exactly help the FAST Act’s supposed beneficiaries—workers. Labor-saving technologies reduce costs by making employees more efficient. And when employees are more efficient, employers need fewer of them. That means fewer hours, smaller paychecks, and fewer jobs for California’s fast-food workers.
At bottom, the FAST Act will likely benefit only one party—the SEIU. The union will get a seat (or two) on the Council. And that seat will give it new clout over the restaurant business without having to actually organize restaurant workers. Restaurants will have to hold their noses and bargain with the union. And lost in the shuffle will be the workers, who may soon find themselves looking for new jobs.
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