California’s Fast-Food Wage Hike: What It Means for Workers and Consumers

California Governor Gavin Newsom approved a new minimum wage for fast-food workers last year, raising it to $20 an hour. As we approach the one-year mark, there’s talk of another possible pay increase.

The state’s Fast Food Council is set to meet soon to discuss a potential cost-of-living adjustment to wages. This meeting will allow the public to share their thoughts.

Many workers and labor advocates are pushing for a new pay hike. Last year, the wage jumped by 25% for employees at larger chain restaurants. This increase came into effect on April 1. The council, composed of both workers and employers, can raise wages annually by up to 3.5% to keep pace with inflation, while also addressing other working conditions.

However, restaurant owners are concerned. They ask the council to consider the financial struggles they face after last year’s wage hike. Operators have shared stories of being forced to cut staff hours and reduce positions, despite raising menu prices to cope with rising costs like rent.

For example, Angel Mendez, who runs a Subway in Burbank, reported cutting his staff from 14 to 7. He also reduced payroll hours by 50%. Though he raised his menu prices by 18-20%, his rent increased by 5%, adding to his financial strain.

Lilly Rocha, head of the Latino Restaurant Association, pointed out that many of her members are small business owners with few locations. She emphasized that the wage increases hit smaller franchise operators hard, contradicting the notion that only large corporations bear the burden.

The subcommittee held a meeting in January where member Richard Reinis raised a valid point: Are there enough data to support another wage increase? He suggested that input from various state agencies is necessary before making any decisions.

This debate is intensified by mixed research findings. A report sponsored by Save Local Restaurants claimed California lost 10,700 limited-service jobs in the past year, the largest drop since the COVID pandemic and the Great Recession. Meanwhile, the average menu price in California surged by 14.5%, almost double the national average.

Contrasting this, a study from Harvard and UC-San Francisco found no significant negative effects from the wage changes. It indicated that fast-food workers gained $2.50 per hour on average and the number of workers earning below $20 per hour dropped significantly.

While some studies show positive outcomes, others raise alarm bells. A report from Northwestern University highlighted that 25% of fast-food workers in Los Angeles earned less than the minimum wage last year, a sharp rise from just 3% in 2009 due to wage theft issues.