LIVERMORE, Calif. – As California gears up for a new law to take effect on Monday, most fast food workers in the state are set to receive a pay increase to at least $20 an hour. The move, championed by Democrats in the state Legislature, aims to bring more financial stability to a profession historically known for low wages. However, the wage hike also poses the risk of driving prices up in a state already grappling with a high cost of living.
The legislation was passed with the understanding that a significant portion of the over 500,000 fast food workers in California are not just teenagers looking for extra cash, but adults trying to support their families. One such worker is Ingrid Vilorio, an immigrant who began working at McDonald’s shortly after arriving in the United States in 2019. Vilorio, who now juggles multiple jobs including one at Jack in the Box, views the $20 raise as a much-needed relief.
Support for the law came from the trade association representing fast food franchise owners. However, since its passage, many franchise owners have expressed concerns about the financial impact, particularly in light of California’s slowing economy. One such owner, Alex Johnson, who operates multiple Auntie Anne’s Pretzels and Cinnabon restaurants in the San Francisco Bay Area, anticipates significant cost increases.
Johnson estimates that the wage increase will add roughly $470,000 to his yearly expenses. To offset the rise in labor costs, he plans to raise prices at his stores by 5% to 15% and has halted any plans for expansion or new hires in California. Despite wanting to pay his employees fairly, Johnson admits that the law is putting a strain on his operations, leaving him no choice but to consider selling or closing down his businesses.
The incremental wage raises over the past decade have brought California’s minimum wage for most workers to $16 per hour. Despite concerns about potential job losses due to increased expenses for employers, data from Michael Reich, a labor economics professor at the University of California-Berkeley, showed that wages went up while employment remained stable, with some areas in the state already having higher minimum wages than the state mandate.
The law governing the wage increase represented a collaboration between the fast food industry and labor unions, after years of disputes over wages, benefits, and legal obligations. The law’s application is specified for fast-food restaurants with limited or no table service, operating under a national chain with at least 60 establishments nationwide. Some exemptions exist, such as for restaurants within grocery establishments or those solely offering bread as a menu item, provided it is not a stand-alone bakery.
As the new law prepares to take effect, some exceptions have emerged, such as the exemption initially believed to apply to Panera Bread restaurants. However, the Newsom administration clarified that the law does apply to Panera Bread as it does not produce dough on-site. Despite initial confusion, wealthy campaign donor Greg Flynn announced his commitment to paying workers at least $20 per hour, aligning with the impending legislation’s objectives.