Chili, McDonald’s, Starbucks, Jack in the Box and Shake Shack are planning to increase restaurant prices. Owners of fast-food restaurants are firing workers or cut hours. Smaller separate business owners, however, worry their workers likely bolt unless they also boost wages.
Major restaurant chains are looking at every aspect of their businesses to make the most of the additional money they will soon be spending on labor, with California’s mandatory minimum wage set to increase to$ 20 an hour starting on Monday. In many cases, consumers will end up eating the price.
” It’s going to be a very major boost to our labor”, Jack Hartung, Chipotle’s chief financial officer, said of the new rules during the agency’s next- quarter earnings call. He predicted that the burrito chain had increase prices” by a mid-to-high single-digit” percent as a result. ” We are going to pass this on without a doubt.”
The pay raise established by Assembly Bill 1228 applies to California fast-food workers who work at any string with more than 60 locations nationwide, and it also includes those who work at corporate-owned and licensed locations. The condition has more than 540, 000 speedy- food personnel, about 195, 000 of them in Los Angeles and Orange regions, according to the latest May 2022 statistics from the U. S. Bureau of Labor Statistics.
The current minimum wage in California, regardless of industry, is$ 16 an hour, meaning several cashiers, range and training cooks, shop attendants and staff will see as many as a 25 % increase immediately.
Jaylene Loubet, 25, has worked as a cashier at a McDonald’s in Cypress Park since 2017, first making$ 16.25 an hour.
Since then her hourly pay has only risen to$ 17.50, she said, the same amount that her mother, a longtime cook at the same spot, makes. In a one-bedroom flat in Glassell Park, the two live together with Loubet’s father, who is unable to pay for a bigger home.
” When you’re in a difficult financial condition, even though it’s not enough to be pleasant, it does assist”, Loubet said of her impending increase. That said, “food is going up as well, book is going up as well, costs are going up as effectively. Even with the$ 20, cash is also going to be strong”.
Since 2009, the federal minimum wage has been stagnant at$ 7.25 per minute, with many cities and states taking the initiative to raise the bar. However, the California bump for fast-food workers is strange for directly adjusting the maximum rate at once for a particular industry.
Harry Holzer, a Georgetown University people policy teacher and the Clinton administration’s chief economist, called the change” a spectacular increase on a state minimum wage that was already very high. The employees who continue to do their work may be content because they will perform better.
Less but for users of fast food, who will certainly pay more for their sandwiches, tacos and cooked meat. David Neumark, a minimum- wage expert at UC Irvine, estimated that overall prices will rise between 2.5 % and 3.75 %.
That is a small number, but it is significant given the rough prices that fast-food customers have experienced recently. Nationwide, rates at restricted- company restaurants are up nearly 30 % from February 2020 levels, according to the Bureau of Labor Statistics. Additionally, higher prices for fast food will hit lower-income households harder because they spend a larger portion of their income on food and consume disproportionately more of it.
McDonald’s ‘ spokesperson stated that the company was looking into several ways to offset the rise in labor costs and has not yet decided how much to raise the price of menu items. Although McDonald’s provides “informed pricing recommendations”, the spokesperson noted that final pricing is at the discretion of franchisees.
Starbucks claimed that it had chosen to raise the pay scale in California for all levels of employees in order to keep employees and stop wage compression, even though there are no significant pay differences between entry-level employees and experienced employees. A spokesperson for the company stated that it intends to make up for the increased labor costs” through a number of levers, including near-term pricing and other efficiencies.”
There are n’t clear conclusions about the long-term effects of such a sudden and sharp pay increase. In general, raising the minimum wage helps large swaths of low- wage workers, bringing some out of , poverty, but others will lose out as employers scale back through layoffs, shorter shifts, reduced hiring and other cost- saving measures.
” Where they can automate, they will automate more”, Holzer said. ” Some franchises may relocate out of states.”
More fast-food restaurants are installing self-service ordering kiosks as a result of the COVID-19 pandemic, and the industry is considering alternative ways to reduce its use of human resources, including the use of robots.
Fast-food chains can afford to pay up, claim the new law’s proponents. Since the pandemic first started, the industry has grown thanks to customers ‘ desire for affordable, quick meals, leading to billions in sales and record profits.
However, the brands claim that they have also had to deal with high prices for ingredients and supplies and that they have already raised wages for their employees without getting a government’s approval. The average weekly wage for employees at limited-service restaurants increased by 26 % to$ 501 between 2019 and 2022.
Labor accounts for roughly a third of the costs for a typical fast-food restaurant, making franchise owners especially anxious about being able to bear the extra costs.
Shortly after Gov. Gavin Newsom signed the pay increase legislation into law in September, hundreds of Pizza Hut franchises in California moved to lay off more than , 1, 100 delivery drivers, federal and state filings show.
According to the California Employment Development Department, franchise owners operate the affected Pizza Huts and are spread out from Orange to Stanislaus counties. The layoffs were anticipated to take effect in February.
Fast food is tightly woven into the history, cultural life and economic growth of Southern California.
In 1937, brothers Richard and Maurice McDonald established a drive-in restaurant in Pasadena, a few years before launching the first McDonald’s in San Bernardino. Another pioneer,  , Carl Karcher, bought a hot dog cart in L. A. in 1941 and went on to found Carl’s Jr.
Taco Bell, In- N- Out Burger and Jack in the Box also come from the region.
Collectively, their explosive growth across the U. S. and sustained success over the decades symbolized the busy American life, the rise of the baby boomer generation and California’s love affair with cars.
However, the industry has come to be viewed as the stereotypical low-wage sector, where millions of workers earn the minimum wage and work in harsh, sometimes dangerous conditions, making it a hot topic for the Fight for$ 15 movement, as well as books like” Fast Food Nation.”
The passage of , AB 1228 , represented a significant win for fast- food workers who for years have organized for better wages and protections. A Fast Food Council, made up of business and labor representatives, has the authority to establish standards for working conditions, employee safety, and training, as well as the higher minimum.
Employees at fast-food or limited-service restaurants across the country average about 25 hours per week on average. Some are given short notice or forced to work two separate shifts in a single day, making the schedules unpredictable.
Angelica Hernandez, who works as a cook trainer at a McDonald’s in Monterey Park and was appointed to the Fast Food Council, called the$ 20 minimum wage” good progress”. She worries that the restaurant will change and cut back on its employees ‘ hours, which it has done in the past and increased wages.
” They’re utilizing one person to do the job of two, three or four people”, she said.
Earlier this year, workers formed the , California Fast Food Workers Union, which is part of the Service Employees International Union, to bargain with the council. The union has said it plans to push for annual wage increases, predictable schedules and just- cause protections.
As the economy slows, workers can anticipate maintaining some leverage in upcoming negotiations. Although not as fierce as at the height of the Great Resignation in 2021- 22, when many people quit their jobs and rethought their work and life priorities after COVID- 19, there is still fierce competition for fast-food workers.
According to economists, a guaranteed$ 20 per hour could entice people on the sidelines into the fast-food job market, including teenagers who once dominated the fast-food workforce.
Over the years, the average age of fast-food workers in the United States has increased gradually as more teenagers have switched to pursuing enrichment positions to get ready for college. According to the Bureau of Labor Statistics, the median age for fast-food workers is now 22.1 years old.
Zev Brown, a senior at Eagle Rock High School, has worked government jobs and on political campaigns since his sophomore year, earning$ 18 to$ 25 an hour.
Although he knows classmates who have jobs at Starbucks, McDonald’s and Burger King, he said most of his friends prefer to work for local mom- and- pop businesses or start their own money- making ventures.
According to Brown,” People want to work in the neighborhood where they call home and the school district.” Both side-hustle culture and entrepreneurial culture are extremely important.
That said,$ 20 an hour makes a fast- food job “more enticing for a student”, said his friend, 17- year- old Sawyer Sariñana, who has been making money through photography work.
” I would definitely consider it now— I think that’s a big jump and makes a big difference”, said Sariñana, also a senior at Eagle Rock High School.
Fast- food locations in grocery stores, airports, hotels, theme parks, sports venues and other businesses are exempt from the minimum- wage increase, as are employers that operate a bakery on the premises — a loophole that has raised questions about whether , Panera Bread , and others like it must comply.
At first, it seems as though restaurant owners who are not subject to the mandate now have an advantage: As the big fast-food restaurants lay off or employ fewer employees, that could increase the pool of available workers who could be paid less than$ 20 an hour. Owners of independent fast-casual and full-service restaurants do n’t know if that will be the case, and they anticipate having to raise salaries to keep up with demand.
” Every bump in the restaurant labor market raises the prices for everyone, period. It does n’t leave us out”, said Jeff Strauss, owner of sandwich counter Jeff’s Table in Highland Park.
After the April 1 wage hike kicks in, California could look at how things might go in West Hollywood and Seattle as a result of their rapid increases in minimum wages.
After fierce opposition from business owners, West Hollywood increased the minimum hourly rate to$ 19.08 per hour in July, just days before Charcoal Sunset, a chef, opened his steakhouse and seafood restaurant.
Citrin claimed over the course of several months that he had tried everything to make it work, including reducing the number of employees from 50 to 30 and introducing a more limited menu.
However, the newly opened restaurant was unable to handle the high wages and severe decline in customer spending as a result of the Hollywood strikes. Citrin closed Charcoal Sunset in February.
” At a point, you ca n’t trim anymore”, he said. ” When I closed at the end, there was no more money to operate”.
Seattle, one of the first in the national Fight for$ 15 campaign, lifted its minimum wage from$ 9.47 an hour in April 2015 to$ 13 in January 2016— a 37 % jump over a nine- month period.
According to Jacob Vigdor, a University of Washington public policy professor who directed the minimum-wage study, researchers at the University of Washington found that businesses overwhelmingly survived.
However, overall employment at Seattle’s eateries and bars increased significantly less quickly after 2016, and there was another drawback: Workers saw fewer hours on average, by about 10 %.
Seattle made it more expensive for restaurant and retail employers to retrain employees and change their work schedules in 2017. Californian labor union officials are attempting to emulate this trend in fast-food restaurants.
” It was never just about wages”, said April Verrett, the SEIU’s national secretary- treasurer. ” This is about empowering workers”.
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