The new California $20 minimum wage for most fast-food restaurants hit April 1. It jumped $4.50, or 19%, from the $15.50 on Dec. 31 That increase definitely is helping the 500,000 workers getting the pay boost – those who will keep their jobs. Some early reports from Monday are showing businesses being slammed by the higher costs.
Subway franchise owner Keith Miller told NBC 7 San Diego, “You keep kind of wondering when you’re going to break the camel’s back?”
“We’re having to get more efficient,” Michaela Mendelsohn, who manages 170 employees at El Pollo Loco, told NPR. “So really, what’s left is … to reduce labor hours. And I hate saying that.”
The 19% increase is “unprecedented as far as I know,” Raymond Sfeir, director of the A. Gary Anderson Center for Economic Research at Chapman University, told us. He warned the increase will bring layoffs, higher prices for consumers, more use of technology such as automatic burger flippers and restaurant closures.
“The unfortunate part is that many franchisees are small operators and not owners of dozens if not hundreds of restaurants,” he warned. They’re the small capitalists who are the heart of a local economy, contributing to charities and sponsoring little-league times.
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edCalifornia’s unemployment rate for February was 5.3%, the highest of any state. Sfeir speculated the higher wage might kill 3% of jobs in the “limited service restaurants and other eating places” sector, which includes fast-food restaurants. That would add about 0.12 percentage points to the state’s unemployment rate, raising the total to 5.42%.
We won’t know the overall effect for several months as the higher wage plays out. But the higher prices for consumers are on top of the overall inflation of the past four years. The Consumer Price Index for February jumped 3.2% from the year prior, still above the 2% considered reasonable. That’s on top of the sticker shock consumers still are suffering from prices rising 7% in 2021, 6.5% in 2022 and 3.4% in 2023.
Costs are piling up like spoiled ketchup on a rancid burger patty.
