Fast food wage increases will take effect next week
Starting Monday, most fast-food workers in California will earn more than $20 an hour, the highest minimum wage in the entire U.S. restaurant industry. But the wage increase has sparked intense debate, with some restaurant owners warning of job losses and higher prices for customers, while labor advocates tout the benefits of the increase.
The new law, signed by Gov. Gavin Newsom last fall, goes into effect April 1 and requires fast-food chains with at least 60 stores nationwide to pay their workers at least $20 an hour. This means the state's 553,000 fast food workers will earn more than the state's $16 minimum wage for all other industries.
The new standard wage comes amid strong earnings for the fast food industry, with major chains like McDonald's enjoying strong sales growth and expanding profit margins in recent years. Part of that is due to menu prices that far outpace inflation, with fast food prices rising 47% over the past decade, while other prices average It is said to be 29%. tank.
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Ari Bustamante, a labor expert at the Roosevelt Institute and a co-author of the analysis, told CBS MoneyWatch that “for the past 10 years, prices have far exceeded operating costs, and these companies are facing higher operating costs.” We were able to absorb the costs.” “This is intended to give workers a better economic footing to cover their household needs by increasing the minimum wage to a new $20 minimum wage.”
Before the April 1 wage increase, the highest-paid fast food workers in the U.S. were in Washington state, where the minimum wage was $16.28 an hour.
What’s on the menu – price increases
Some California restaurant owners argue that higher labor costs will lead to higher prices for customers and even reduce hiring. One California franchisee told CBS MoneyWatch that while large fast food chains may be able to absorb these costs, smaller operators will struggle.
“We're not a big company with deep pockets. We're Main Street, not Wall Street,” said Alex Johnson, owner of 10 franchised restaurants in the San Francisco area, including Auntie Anne's and Cinnabon's. he says.
Johnson's company is subject to the new wage law because its parent franchisor operates more than 60 restaurants across the United States.
Alex Johnson, who runs the chain's 10 stores in the San Francisco area, said he may need to raise prices this year to offset the new $20 minimum wage for fast food workers.alex johnson
Johnson said the pay increase comes at a time when his restaurants are already dealing with weak sales, which he blames on consumers consumed by two years of high inflation and California's high cost of living. There is. To offset the new $20 minimum wage, Prime Minister Boris Johnson expects to raise prices by about 10% this year, with plans for two smaller increases.
“I can't think of a worse time for price increases,” he said.
The typical California restaurant faces an additional $250,000 in annual expenses to cover the April 1 wage increase, according to the Save Local Restaurant Coalition, which cited data from the McDonald's Owners Association. This group represents restaurant owners.
Chipotle Chief Financial Officer Jack Hartung said in an earnings call last month about the California law, “We understand that a wage increase of about 20% would mean we would have to consider a significant increase.'' Ta.
Chipotle's 3,400 U.S. locations could see a 1% price increase to compensate, he added.
Starbucks told the Los Angeles Times it plans to offset the wage increase with higher prices and other factors.
“There is no quick-service restaurant owner in California who can immediately afford a 25% wage increase for all of his employees,” said Mike Whatley, vice president of national affairs and grassroots initiatives at the National Restaurant Association. The industry told CBS MoneyWatch.
“Consumers are starting to feel that in menu prices, and employees across the state are starting to feel that,” he added.
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Some critics of wage laws argue that rising costs will lead to layoffs and reduced hiring. Some Pizza Hut stores in California are already planning job cuts, according to filings with the state Department of Labor. Pizza Hut did not respond to a request for comment.
Johnson said the company is not hiring at this time and plans to introduce more automation, such as ordering to kiosks, to reduce the need for human labor. He is also considering selling franchised locations in California to focus on lower-cost restaurants in Nevada.
“While I work hard to treat our employees fairly, these actions result in increased costs. We are no longer hiring and may close or sell our restaurants. “We are considering it,” Johnson added. “It's a sad time.”
“An economy that works for everyone”
Labor advocates say the new law will help fast food workers, who earn an average of $16.60 an hour, or just over $34,000 a year, according to government data. This is below the poverty line for a family of four in California.
Tia Orr, executive director of the California Service Employees International Union, a labor group that pushed for the law, said the wage increase is “a step toward transforming the economy to benefit everyone, not just billionaires.” It's a step,” he told The Associated Press.
When Newsom signed the law last year, he rejected the idea that fast-food jobs are primarily held by teenagers, emphasizing that many families depend on jobs for income. According to Business Insider, the average age of fast food workers is around 26 years old.
Meanwhile, dozens of states and localities have raised their minimum wages in the past few years, even though the federal standard remains at $7.25 an hour. This rate has been frozen since 2009. Some economic studies have found that higher wages do not lead to higher wages. While leading to job losses, it also has the benefit of providing economic security for workers, boosting consumer spending and stimulating broader economic growth.
Experts say California businesses have had to weather multiple wage increases over the past few years, but have remained afloat.
“California has experienced minimum wage increases for over a decade,” Bustamante said. “You can’t start a business in California without expecting a minimum wage increase.”
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