California’s recent move to raise the minimum wage for fast food workers to $20 an hour is causing ripples across the industry. While intended to boost worker income, this law is leading to outcomes that appear to be hurting the very people it aimed to help.
Let’s break down what’s happening:
The New Law
In April, Governor Gavin Newsom signed a law raising the minimum wage for fast food workers to $20 per hour. This represents a significant jump from the previous rate of $16. The law also created the California Fast Food Council, which can further increase wages in the future.
Impact on Business Owners
Fast food franchise owners are feeling the squeeze. Lawrence Cheng, who owns several Wendy’s restaurants in Southern California, told the Associated Press, “We kind of just cut where we can. I schedule one less person, and then I come in for that time that I didn’t schedule and I work that hour.”
Cheng has had to reduce his staff from about a dozen employees per afternoon shift to just seven. He’s also had to raise menu prices by 8% to offset costs.
Juancarlos Chacon, who owns nine Jersey Mike’s locations in Los Angeles, faces similar challenges. He’s had to increase prices more than ever before in his 25-year career. Chacon notes that customers are now less likely to add drinks or sides to their orders, further impacting revenue.
Worker Impact
While the wage increase sounds good on paper, it’s not necessarily translating to more money in workers’ pockets. Here’s why:
- Reduced Hours: To manage costs, owners are cutting employee hours.
- Job Losses: Some businesses, like Chacon’s, have had to let workers go. He’s laid off about 20 of his 165 employees.
- Increased Workload: With fewer staff on shift, remaining employees may face more stress and responsibilities.
The California Business and Industrial Alliance (CABIA) reports that by June, about 10,000 fast food jobs had been cut statewide since the wage hike.
On April 1st, California raised the minimum wages for fast food workers to $20/hour.
That same day, Fosters Freeze went out of business and laid off all 20 employees.
The owner says that he was crushed but is unable to sustain the wage hike as a small business owner.
Mass… pic.twitter.com/thJbuqLBfR
— End Wokeness (@EndWokeness) April 4, 2024
The Big Picture
Jot Condie, president and CEO of the California Restaurant Association, summarizes the situation:
“When labor costs jump more than 25 percent overnight, any restaurant business with already-thin margins will be forced to reduce expenses elsewhere. They don’t have a lot of options beyond increasing prices, reducing hours of operation, or scaling back the size of their workforce.”
This scenario is like trying to fill a bucket with a hole in it. As wages go up, hours go down, potentially leaving workers in the same financial position – or worse.
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Who could have predicted that California’s woke ideology of raising minimum wage a whopping $4 per hour would trigger higher prices for consumers, reduced hours for workers, and potential job losses, hurting the very communities the law “intended” to help?
Let’s hope other states take notice and don’t repeat the disaster California has created for itself.
