EDITORIAL: California bakes up cronyism with new minimum wage law

Freshly baked bread has a pleasant aroma. But California’s new minimum wage, with a carve-out for companies baking bread, has an entirely different odor.

Next month, California’s minimum wage for fast-food workers will increase to $20 an hour. That’s above the state’s $16-an-hour requirement for all employers. But not all restaurants will pay the price. If a chain bakes bread and sells it as a separate item, the minimum wage will remain at $16 an hour. Questions around that provision have percolated for months. California Gov. Gavin Newsom previously said it was “part of the sausage making.”

In a recent report, Bloomberg shed more light on the matter. It reported that Gov. Newsom pushed for the exemption, which will benefit companies such as Panera Bread.

Billionaire Greg Flynn owns about two dozen Panera Bread franchises in California. You probably aren’t familiar with that name, but Gov. Newsom is. Their connection dates back to high school. In 2014, Mr. Flynn purchased a Napa Valley resort that was run by a hospitality company owned by Gov. Newsom, although that arrangement didn’t last for long.

Mr. Flynn has been a generous donor to Gov. Newsom, including giving $100,000 to fight the effort to recall the governor. Further, Mr. Flynn has reportedly talked openly about his relationship with Gov. Newsom. One source told Bloomberg that Mr. Flynn said he communicates with the governor via text.

Unsurprisingly, Mr. Flynn was a vocal critic of the minimum wage hike. He wrote in an op-ed that the proposal “would effectively kill the franchise business model in the state.” Bloomberg reported that he pushed the governor’s staff to remove Panera Bread from the list of fast food restaurants.

During negotiations over the bill, the Service Employees International Union agreed to the bread exception. “That position was adopted as a means of winning the governor’s support for the legislation, said a person with knowledge of the discussions,” Bloomberg reported. “The rationale was the governor’s longstanding relationship with a Panera franchisee, the person said.”

This is the crony “capitalism” you create when you stray from the principle that the government shouldn’t pick winners and losers in the economy. Bills are no longer about the merits but favors, relationships and back scratching. It’s not just the bread exception. Note who helped drive this legislation — the SEIU. That’s a labor union leveraging its political power to benefit its members.

Political connections that shield you from bad policy may be nice for a moment. But the best thing since sliced bread is the free market, which has allowed the creation of unprecedented prosperity. That’s what California kneads to return to.