Most fast-food workers in California will now be paid at least $20 an hour due to a new law that went into effect on April 1.
It is aimed at giving greater financial security to employees in the historically low paid fast food industry. However, warnings have been made that the move will increase the cost of fast food in a state that is already known for high living costs.
The legislation was passed in 2023 by Democrats in a bid to acknowledge the low pay in the fast-food restaurant trade, of which more than 500,000 people are employed in across California. The law applies to restaurants offering limited or no table service and which are part of a national chain with at least 60 establishments nationwide.
Pay at $20 per hour is significantly higher than the overall state minimum wage of $16 an hour. It is also more than double the current federal minimum wage of $7.25 per hour.
But the new law has attracted criticism from some fast-food companies, which claim they will be forced to raise the cost of products for consumers to fund the additional expense. A number of businesses have been looking to find loopholes as a means of avoiding paying the higher wage.
Alex Johnson owns 10 Auntie Anne’s Pretzels and Cinnabon restaurants in the San Francisco Bay area. The fast-food restaurant owner says increasing the wages of his workers to $20 an hour will cost him around $470,000 a year. In order to fund the additional costs, he says he will have to raise prices from between 5% and 15%. Additionally, he is no longer hiring or taking on new locations in California.
“I try to do right by my employees. I pay them as much as I can. But this new law is really hitting our operations hard,” Johnson told the Independent. “I have to consider selling and even closing my business. The profit margin has become too slim when you factor in all the other expenses that are also going up.”
The rise in the minimum wage highlights the challenges businesses are under as they strive to look after workers to help generate a fairly paid, content and loyal workforce, while keeping prices at reasonable prices for consumers as the cost of living continues to rise.
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This article, “California’s $20 Minimum Wage Set to Increase Fast Food Prices” was first published on Small Business Trends