By TERRY CHEA and ADAM BEAM (Associated Press)
In California, most fast food workers will see their pay increase to at least $20 per hour starting Monday as a new law takes effect. The law aims to offer more financial security to a profession that has traditionally paid low wages, but it may also result in price hikes in a state already known for its high cost of living.
Last year, Democrats in the state Legislature passed the law as a way of recognizing that many of the over 500,000 people employed in fast food restaurants are not just teenagers earning pocket money, but adults supporting their families.
This includes immigrants like Ingrid Vilorio, who began working at a McDonald’s shortly after coming to the United States in 2019. Until last year, she worked full-time in fast food, and now works about eight hours per week at a Jack in the Box while holding other jobs.
Vilorio expressed that the $20 increase is positive, but she wishes it had come sooner as it would have reduced her need to seek additional jobs at different places.
The law had the support of the trade association that represents fast food franchise owners. However, since its passage, many franchise owners have lamented the impact of the law, particularly given California’s slowing economy.
Alex Johnson, who owns 10 Auntie Anne’s Pretzels and Cinnabon restaurants in the San Francisco Bay Area, mentioned that sales have slowed in 2024, leading to layoffs of office staff and relying on family for payroll and human resources assistance.
Increasing employee wages will cost Johnson about $470,000 annually. He will need to raise prices by 5% to 15% at his stores and is no longer looking to hire or open new locations in California.
Johnson stated, "I strive to treat my employees fairly, paying them as much as I can. However, this law is significantly impacting our operations."
He also said, “I have to think about selling or even closing my business. The profit margin has become too slim, considering all the other increasing expenses.”
Over the last decade, California has doubled its minimum wage for most workers to $16 per hour. During this time, a major concern was whether the increase would lead to job losses as employers’ costs rose.
According to Michael Reich, a labor economics professor at the University of California-Berkeley, data showed that wages rose and employment did not decline. He expressed surprise at the minimal or difficulty in finding negative employment effects, and noted that if anything, they found positive employment effects.
Reich also mentioned that while the statewide minimum wage is $16 per hour, many of the state’s larger cities have their own minimum wage laws, setting rates higher than that. This means the increase to $20 per hour will be smaller for many fast food restaurants.
Reich explained that the law was a result of a well thought out compromise between the fast food industry and labor unions, after two years of wrangling over wages, benefits, and legal obligations. The law was the outcome of private negotiations between unions and the industry, which included the unusual step of signing confidentiality agreements.
The rule affects restaurants that offer limited or no table service and are part of a national chain with at least 60 locations nationwide. Restaurants inside a grocery store and those that primarily make and sell bread are not affected by the rule.
Initially, it seemed that the bread exception included Panera Bread restaurants. Bloomberg News stated that the change would help Greg Flynn, a wealthy supporter of Newsom's campaign. However, the Newsom administration clarified that the wage law does apply to Panera Bread because they do not make dough on-site. Additionally, Flynn has stated that he will pay his employees a minimum of $20 per hour.
Beam reported this from Sacramento, California.
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Most fast food workers in California are going to receive a minimum of $20 per hour. A new law requiring this wage increase for fast food workers is set to take effect on Monday. The increase has been celebrated by workers and labor unions who believe it will provide a decent wage. However, some business owners believe it will force them to raise prices or reduce their workforce. California's minimum wage for most other jobs has doubled to $16 per hour over the last ten years. Michael Reich, a professor at the University of California-Berkeley, says employment did not decrease during that time.
