How has Gavin Newsom’s $20 minimum wage for fast food workers affected the state? The Employment Policies Institute thinks it knows the answer.
California’s $20 Wage Woes
A new survey is claiming that California’s fast-food industry is in turmoil – thanks to Governor Gavin Newsom’s $20-an-hour minimum wage law.
Fast Food Fiasco
According to the Employment Policies Institute (EPI), nearly 200 fast-food joints across the state are feeling the strain. From cutting back employee hours to considering a move out of California, the new wage law is causing chaos.
The Real Deal
But what’s the real story here? Well, it turns out that 89% of these fast-food places have already slashed worker hours, and it’s been less than a year since the law came into effect. Some have even had to let staff go – a scenario that critics had warned about when Newsom signed the bill last fall.
Worker Woes
The law was supposed to be a big win for workers, but many small franchise owners and their employees aren’t feeling the love. Those who still have their jobs are seeing fewer opportunities for overtime and extra shifts, meaning their paychecks are taking a hit.
The Vanishing Act
The survey, which looked at 182 fast-food operators, also found that over 6,000 fast-food jobs have vanished since January.
Students Left High and Dry
And it’s not just employees suffering. College students, home for the summer and looking for some steady local work, are finding it nearly impossible to land a job. It’s a far cry from the steady summer employment they enjoyed in high school.
Financial Fries
The survey claims that the financial strain on businesses is causing them to struggle. 98% of fast-food spots surveyed confirmed the $20 minimum wage affects them, and nearly half of them said this law would cost each restaurant between $100,000 and $200,000.
Prices Soar, Staff Shrinks
The reality is hitting hard, as nearly every fast-food restaurant has had to hike prices. In fact, 98% said they’d upped menu prices to cope with the new wage law. To manage costs, 70% have reduced staff, while 75% have limited overtime and extra shifts. All these changes are adding about $100,000 in expenses per location every year.
Big Names, Big Pain
Though the survey didn’t name specific chains, it’s no secret that major players like Carl’s Jr., Jack in the Box, and El Pollo Loco are being affected.
The $200K Question
Over a quarter of respondents expect that the law will cost them as much as $200,000. An overwhelming 93% indicated they would have to raise menu prices even more, with 87% anticipating more cuts to employee hours down the line.
Will Higher Prices Drive Customers Away?
What’s more, 99% predicted price hikes down the line – with 73% bracing for big increases. 92% of businesses surveyed believed that higher prices would scare off customers, and 89% were hesitant about expanding within California.
Greener Pastures
More than half are thinking about expanding outside the state to benefit from lower minimum wages elsewhere. And 74% are now seriously considering shutting down their business altogether.
Customers Vote with Their Feet
Recent reports from Business Insider back up these findings, showing a significant drop in customer foot traffic at California’s fast-food joints.
Another Wage Hike on the Horizon?
There’s also controversy brewing after Forbes reported that California officials are mulling over another wage hike for fast-food workers – an extra 3.5% in 2025.
Debating the Future of Fast Food
This proposal is set to be discussed at the California Food Council meeting and could pile even more pressure on an already struggling industry.
Cleanup or Cover-up?
Newsom’s response to the wage law includes a “cleanup” bill, Assembly Bill 610 (AB 610), which introduces a bunch of exemptions.
The Panera Bread Controversy
But controversy erupted when it was revealed that Panera Bread, owned by Newsom’s high school friend and major donor Greg Flynn, got an exemption perfectly tailored to its business model. Despite denials from Newsom’s camp, the public image of him has shifted.
A Waiting Game
Governor Gavin Newsom’s $20 minimum wage law seems to have thrown California’s fast-food industry into chaos.
What’s Next for Fast Food
The full impact of the wage hike will be clearer in the coming months, but for now, things don’t look great. State officials are gearing up to meet next week to assess the industry’s situation.
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Featured Image Credit: Shutterstock / Sheila Fitzgerald.
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