California’s New Fast Food Minimum Wage Takes Effect: $20 for Workers

The minimum wage for the majority of workers in the fast food industry in California is set to increase by 25% to US$20 an hour, effective April 1, 2024, after California law AB 1228 came into effect, as reported by CBS8. 

The law only applies to large chains with 60 or more locations, affecting franchises such as McDonald’s, Pizza Hut, KFC, Subway, Starbucks, yet the raise may also impact small businesses that may need to increase wages to remain competitive. 

Approximately half a million fast food workers in California will be impacted by the law, many of whom are adults supporting families. 

The newly enacted wage offers exceptions granted to certain bakeries and smaller establishments situated within grocery stores, airports, and other venues.

Potential Impacts of the Hike:

• Owners and franchisees of restaurant chains in California assert that increased wages will compel them to implement price hikes, adopt automation, reduce employees’ hours, or potentially shut down their businesses.
• It is anticipated that the wage hike might lead to a roughly 5% increase in fast food prices, as major fast-food chains like Jack in the Box, Starbucks, McDonald’s, and Chipotle intend to increase prices beyond their current levels. 
• A reduction in workforce is also forecasted as certain Pizza Hut branches are already letting go of employees, particularly impacting delivery drivers, according to state labor filings.
• Further, restaurant owners foresee a cutback in employee hours, mirroring findings from a decade ago in Seattle where a minimum-wage hike led to reduced hours for workers without significant job losses, though they still earned more on average.
• On the other hand, it is also suggested that higher pay could attract more workers to the industry.

Public Reception of the Hike:

• Opinions on the pay raise are divided.
• The change is celebrated by many fast-food employees who have advocated for livable wages.
• Nonetheless, some individuals argue that entry-level positions at fast food establishments shouldn’t offer such high wages, suggesting that it diminishes the value of qualifications earned through education.

Additional Information:

• California’s increase in wages stems from a contentious agreement brokered by labor leaders, notably the Service Employees International Union (SEIU), in collaboration with fast-food corporations.
• A Fast Food Council has been established for the new law within the California Department of Industrial Relations.
  
• The Council comprises representatives from both restaurant employees and owners, to develop standards, rules, and regulations specifically tailored to the fast-food sector.
• Despite inflation cooling down in other sectors, the cost of dining out continues to steadily rise in the United States.
• As of January 1, 2024, the general minimum wage in California for jobs outside the fast food industry stands at US$16 per hour, significantly higher than the federal minimum wage of US$7.25 per hour. 
• The minimum wage for Healthcare Facility employers in California is also set for an increase, effective June 1, 2024.
• California often leads in business policy trends in the US, with proponents of the wage increase aiming for its emulation in the fast-food industry and beyond, especially as the federal minimum wage remains stagnant, prompting efforts at local and state levels.