California Law Raising Minimum Wage Just For Fast Food Chains Already Backfiring

As the April 1st deadline for California’s fast-food worker wage increase to $20 an hour approaches, restaurants across the state are already dealing with the financial implications by laying off workers and cutting hours.

According to state records, pizza chains in particular have outlined plans to cut hundreds of jobs in the months leading up to the mandate, with franchisees for Pizza Hut and Round Table Pizza stating their intention to lay off around 1,280 delivery drivers this year.

Supporters of the law, which also establishes a state-appointed council to oversee the measures, believe it will improve the lives of hundreds of thousands of local workers. Organized labor groups hope to see similar laws implemented in other states.

However, restaurant operators are exploring various cost-cutting measures to offset the 25% increase from the state’s current $16 minimum wage.

Major chains like McDonald’s, Chipotle Mexican Grill, and Jack in the Box have announced plans to raise menu prices in California.

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Meanwhile, many operators are considering reducing hours, closing during slower periods, and serving menu items that require less preparation time.

The impact on employment is already evident, with California’s fast-food and limited-service eateries employing 726,600 people in January, a 1.3% decrease from September when the state backed the wage increase deal.

In comparison, total private employment in the state declined by only 0.2% over the same period.

A recent study by the nonpartisan Congressional Budget Office found that raising the federal minimum wage to $17 an hour by July 2029 could increase wages for more than 18 million people but potentially reduce employment by about 700,000 workers.

The study suggests that higher wages would increase costs for employers, raise consumer prices, and depress some demand, with some employers turning to technology to reduce their reliance on low-wage workers.

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This trend is already apparent in California, with El Pollo Loco automating some of its salsa-making processes and Jack in the Box testing fryer robots and automated drink dispensers to minimize labor needs.

As wages rise you can expect more automation to reduce the reliance on workers and continued cost cutting measures.