California's fast-food industry is undergoing a significant shift as a new law raising the minimum wage to $20 an hour for workers at franchises with 60 or more locations nationwide takes effect on Monday. The move, which is expected to impact around half a million employees, has been met with both praise and concern, as advocates hope it will improve the economic situation of some of the state's lowest-paid workers, while business owners warn of potential consequences such as higher menu prices and reduced working hours.
The fast food-specific minimum wage, the first of its kind at the state level in the U.S., is the result of a compromise between unions and industry figures. It represents a substantial increase from the previous statewide minimum of $16, which was instituted in January. However, the impact of the wage hike may vary across the state, as many cities and counties have already set their own minimum wages above the statewide baseline to account for a locally higher cost of living.
Jaylene Loubett, a McDonald's worker from Los Angeles who has been with the company for six years, acknowledges the significance of the raise but notes that it may not be enough to feel secure given the high cost of living in the city. "Even though it's a big help, people need to realize that $20 compared to the cost of living in Los Angeles, it's still not enough to feel secure," Loubett, 25, says. She hopes to use her raise to start saving toward a bigger home or at least lessen the stress over expenses.
Restaurant chain owners and franchisees, however, have expressed concerns about the impact of higher labor costs on their businesses. Some, like Pizza Hut, have already taken steps to mitigate the effects, such as laying off hundreds of delivery drivers in December and switching to third-party delivery apps. Others, including Jack in the Box, Starbucks, McDonald's, and Chipotle, have announced plans to raise prices more than they have already.
Brian Hom, who runs two franchise locations of Vitality Bowls, expects the price of smoothies, salads, and other items on his menu to increase by 5% to 10% this week to offset the higher wages for his 30-some employees. "I'm happy that my employees are going to make more," Hom says. "But the impacts to the business are the concern... Will I be able to sustain the business?"
While some experts suggest that major wage hikes may not lead to greater unemployment, they could result in decreased working hours for employees. A 2021 study into a $15 minimum wage enacted in Seattle, Washington, in 2014 found that although low-paid workers' wages rose by 3.4%, their working hours decreased by 7%. However, the study noted that overall, workers' wages rose by more than they lost through reduced hours.
California's minimum wage for jobs outside the fast-food industry remains at $16 an hour, though it is higher in some cities and counties. With the introduction of the $20 baseline hourly wage for fast-food workers, California has cemented itself as having among the highest minimum wages in the country, second only to Washington state's $16.28 and Washington, D.C.'s $17.
