Last September, California Governor Gavin Newsom (D) signed a bill setting a $20 minimum wage for fast-food restaurant workers. The new wage is one of the highest in the county, exceeding even Washington, D.C.’s $17.50 minimum wage. While supporters tout the wage hikes as a way to help struggling Californians, critics warn that restaurant owners will respond by laying off workers, cutting hours or accelerating the shift to automation that has already begun.
The law took effect in April, which means it may be too early to tell its final effect. However, a recent Associated Press report detailed the concerns of several fast-food restaurant owners in California who say they have been forced to reduce hours and raise food prices.
“We’re just cutting where we can,” Lawrence Cheng, whose family owns several Wendy’s franchises, told The Associated Press.
Juancarlos Chacon, who owns nine Jersey Mikes stores in Los Angeles, told The Associated Press he has taken layoffs, laying off about 20 part-time employees. He also had to raise prices. For example, a turkey sub that used to sell for less than $10 now sells for $11.15. As a result, customer spending has been declining, he said.
“I’ve been in this industry for 25 years with two different brands, but I’ve never had to raise pricing like I did last April,” he told The Associated Press.
It’s no surprise that many business owners are resorting to layoffs, higher prices, or reduced hours.
Jot Condie, president and CEO of the California Restaurant Association, told the Associated Press: “When labor costs soar by more than 25% overnight, any restaurant business that already has razor-thin margins will be forced to cut back on other expenses. .” There are alternatives to raising prices, reducing hours or shrinking staff. “
As these stories illustrate, while big increases in the minimum wage are a good thing for those who manage to keep their jobs, many employers simply cannot afford higher labor costs. They ultimately pass these costs on to consumers by raising prices or hiring fewer workers. Real minimum wage received by unemployed workers: $0.
