Before Barbara Lee (D-Calif.) went down to defeat to in her state's Democratic Senate primary last month, she was campaigning in part on a proposal to raise the federal minimum wage to $50 per hour.

Given the substantial gap between this figure and the current federal minimum wage of $7.25, her initiative drew considerable attention.

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Since than, a law that gives California's fast food workers a minimum wage of $20 an hour has come into effect. The state already boasted one of the highest minimum wages in the country, at $16 an hour, but even a $4 increase for one significant segment of the workforce makes the push for $50 seem like slightly less of a pipe dream — though the proposal's naysayers likely remain steadfast in their opposition.

Among the critics of Lee's $50 idea is celebrity chef and restaurant owner Andrew Gruel, who expressed grave concerns about the proposal in an interview on Fox Business.

“This would completely decimate every single business in the state of California,” he said, speculating that only a small fraction of high-end retail businesses might withstand a $50 an hour minimum wage.

It might be too early to say whether the increase to $20 an hour for the Golden State's fast food workers has legitimized Gruel's prediction to any degree, though there have already been some reports of restaurant closures in the wake of the new law.

Widespread closures or price hikes?

Gruel delved into the potential financial upheaval for restaurants, illustrating a scenario where higher labor costs could plunge establishments into financial distress.

“To ask a restaurant, which in a phenomenal scenario is profiting 10% on, let's say, 30% labor costs, to double their labor costs to 60%. That means they're going to be net negative 20%,” he explained, concluding that “every single restaurant will close overnight.”

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Gruel also contended that California hosts thousands of state jobs, challenging the state to lead by example and immediately raise those workers’ wages to $50 an hour.

"They can't afford it," he stated, pinpointing the financial impracticality of such a wage increase.

Furthermore, Gruel suggested an alternative method to enhance workers' earnings without escalating wages: reduce payroll taxes to increase net take-home pay. However, he noted this strategy would not be pursued, attributing the inaction to the same financial constraints.

Gruel is not the only restaurateur concerned about rising labor costs. Andrew Wiederhorn, chairman and founder of restaurant operator FAT Brands, recently cautioned that consumers should brace for higher costs while dining out when there are minimum wage increases.

“Someone's got to pay for it and the restaurant operators don't have the margin for that,” Wiederhorn said. “So, prices are going to go up.”

'The worst run state'

Further broadening his critique, Gruel condemned the administrative efficiency of California.

“California is the worst run state,” he said bluntly.

The Golden State indeed faces challenges. Central to Lee's advocacy for a $50 minimum wage is the escalating cost of living in the state.

During a senate debate on Feb. 12, she claimed a United Way report found that a family of four living in the San Francisco Bay Area would need $127,000 a year just “to get by.” (Moneywise found a 2022 United Way Bay Area report that cited a family of four would need $109,088 to meet basic needs.)

For an individual working 40 hours a week at $50 an hour, their annual earnings would amount to $104,000. To put things in perspective, the median household income in America was $74,580 in 2022, according to the Census Bureau.

With files from Moneywise reporter Bethan Moorcraft

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