A McDonald's employee hands food to a customer at a drive-thru window in Los Angeles on September 28.Damian Dovarganes/AP Hide Caption
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A McDonald's employee hands food to a customer at a drive-thru window in Los Angeles on September 28.
Damien Dovarganes/AP
California fast-food workers who cook Big Macs and whip up Frappuccinos will start earning the $20-an-hour minimum wage starting Monday. For many people, this means a 25% raise.
The new state minimum is uniquely focused on a specific segment: fast food, impacting some of the nation's largest chains, including McDonald's, Starbucks, Subway and Pizza Hut.
This is a big win for cooks, cashiers and other fast-food workers, who make up some of the lowest-paid jobs in the United States. Their wages have grown rapidly since the pandemic after decades of stagnation.
California is one of the most expensive states in the country. It is estimated that about 500,000 people work in fast food here, most of them women, immigrants, and people of color. Many people live below the poverty line.
Sacramento resident Sandra Jauregui is counting down the days until her first big paycheck in two weeks. After her 18 years working in several Jack in the Box franchises, her salary jumps from her $17.50 to her $20. That means she can take home an extra $120 with every paycheck she makes.
“It's amazing,” Yauregui, 52, says in Spanish. “At least you'll have a little bit more breathing room…and it'll be easier to pay your rent and other bills.”
Chipotle and McDonald's warn of price hikes and job loss
But the dramatic wage increases also sparked heated debate about the impact on local businesses. Owners of small franchise restaurants are warning that they will have to raise prices, cut hours, cut staff and even close their businesses.
California's wage increases are the result of a controversial agreement struck last year between labor leaders, including the Major Service Employees International Union, and fast food companies. The new wage law applies to fast-food chains with at least 60 stores nationwide, and exempts small fast-food restaurants located in some bakeries, grocery stores, airports and other establishments.
Several fast-food executives have suggested prices will rise 2.5% to 3.5% to offset wage increases. Jack in the Box, Starbucks, McDonald's and Chipotle have all warned of upcoming price increases. This is on top of price hikes that many restaurants have been implementing for months. Even as inflation slows elsewhere, the cost of eating out is still creeping up.
Other chains also plan to accelerate their use of automation, such as kiosks and robots. A major Pizza Hut franchisee has laid off more than 1,000 delivery drivers this year, citing higher wages as the reason for switching to apps like Uber Eats and DoorDash, which pass more delivery fees onto shoppers.
A major California franchisee of Pizza Hut cited upcoming pay increases as the reason it will lay off more than 1,000 delivery drivers as it transitions to delivery apps like Uber Eats and DoorDash.Justin Sullivan/Getty Images Hide Caption
Toggle caption Justin Sullivan/Getty Images
A major California franchisee of Pizza Hut cited upcoming pay increases as the reason it will lay off more than 1,000 delivery drivers as it transitions to delivery apps like Uber Eats and DoorDash.
Justin Sullivan/Getty Images
Franchisees consider reducing working hours
Many restaurant owners expect their employees to work shorter hours. Research shows this was a major side effect when Seattle raised its minimum wage to $15 a decade ago.
“I'm used to being a labor advocate, but I'm in this strange position,” said El Pollo Loco, a longtime advocate for LGBT workers and CEO of El Pollo Loco, which has about 170 employees.・Michaela Mendelsohn, owner of six restaurants, says:
She says her restaurant lost shoppers after preemptively raising prices in February. The focus now is on streamlining operations and cutting costs, such as by changing the amount of time it takes employees to make sauces or closing overnight.
“We need to be more efficient,” Mendelsohn said. “So what's really left is…to reduce the hours. I don't want to say that.”
In recent years, as the federal minimum wage has languished at $7.25 an hour, the fight to raise the minimum wage has become increasingly intense at the city, county and state levels.
Overall, California often sets the standards for many business decisions that are later followed by other states. Supporters hope something similar will happen with charging fast food, and it will spread to other industries in the state and across the country.
California's minimum wage rose to $16 an hour on January 1st.
Employees are excited but also anxious
Many workers have mixed feelings about the pay increase, even though their employer's warning may give them more spending power.
Jauregui, 52, a Jack in the Box employee, works about 54 hours a week between the restaurant and the laundromat to make ends meet for two people.
She says she's always trying to save as much as she can to care for her grandchildren, three of whom she has custody of, who are constantly buying clothes and shoes. And while she marched with her SEIU colleagues to win a pay raise, she fears the downside.
“My boss said my working hours would not be reduced, but everyone else's working hours would be reduced,” Jauregui said.
All of this makes California's wage hike a high-profile example of how exactly raising the minimum wage affects local economies.
“This policy will vary greatly by region in California,” said Jacob Vigdor, a public policy and governance professor at the University of Washington who has studied the impact of Seattle's 2014 minimum wage increase.
The study found that after the minimum wage rose from $9.47 to $13 (during the early years of the “Fight for $15” labor movement), workers generally remained , I didn't lose my job. And they ended up earning higher salaries.
“The restaurant industry is a really tough business,” Vigdor said. “Restaurants are opening and closing all the time, even in places where the minimum wage hasn't changed in over a decade. …Generally speaking, in the restaurant industry businesses find ways to adapt to higher wages. We found that we were able to do this, but labor costs were high.”
KQED's Farida Jhabvala Romero contributed to this report.
