On April 1st, 2024, the state government of California enacted a law that mandated a minimum $20 per hour wage for workers in the fast food industry. The law has specifics as to number of outlets and customer volume but the law quite simply boosts fast food worker’s pay to $20 per hour. California is one of most expensive places to live in the United States and this law was intended to help workers on the lower end of the pay spectrum with inflation and continuing cost of living increases. The law has raised many questions and controversies as it only applies to fast food workers and does not cover other, low paying entry level jobs in such industries such as retail and entertainment. The mandatory increase may also have reverse effects in the state as fast food companies have to contend with both increasing operational costs and higher labor costs. Could this have been a misguided attempt at increasing the standard of living?
Good Intentions or Rushed Decision
The minimum wage in California in 2024 is $16 per hour and ranks third highest in the US. The new mandatory $20 per hour wage for fast food workers makes that group the highest paid minimum wage earners in the country. California has a notoriously high cost of living and boosting wages for entry level jobs has the intention to increase the standard of living for these workers. The law may have had the opposite effect, at least in the short term, as fast food businesses grapple with the impact of this jump in hourly wage. Since the law was enacted on April 1st, the fast food industry and workers themselves in the state has seen some entirely negative outcomes:
- San Diego based Rubio’s California Grill shuttered 48 of its 134 locations
- Tom Maza of The California Business and Industrial Alliance estimates almost 10,000 fast food jobs have been eliminated since April 1st
- California outlets of the Chik-Fil-A chain have has raised prices an average of 10.6% in anticipation of the new wage law
- Other major fast food chains are seeing price increase of 3-5% at their California locations
The law itself seems lopsided as entry level retail workers are not covered by the legislation yet they are still subject to the higher cost of living in the state. A dubious exemption of the Panera Bread chain as a ‘bakery’ also reduces credibility and fairness of the law.
Your First Job in the Good Old Days
The fast food industry depends on entry level jobs to deliver products and services to customers in a traditionally high volume, low margin business. The available labor pool is just as dependent on entry level jobs as they provide easy access to work experience, training and of course, a paycheck. Fast food jobs in particular play an important role as new workers with little to no experience or references, could easily find work at any of the major QSR chains. Companies with well defined training programs could take inexperienced individuals and teach them work skills as well as build strong work ethics. California’s wage boost mandate may have put that cycle in jeopardy as fast food brands cope with ever increasing costs in both labor and resources. Recently, major fast food chains have been closing locations, reducing operating hours and cutting staff in direct response to the State’s mandate. Many brands are advancing plans to adopt more automation technology, reducing their dependence on human workers, further reducing entry level opportunities. That first job, especially for younger workers, could potentially set the stage for ability, work ethic and confidence which will reap huge benefits for the individual in the future. California’s $20 per hour law for fast food workers has had a negative effect on opportunities, reducing the number of those important entry level positions.
Coping with Rising Wage Costs – The Business Perspective
The new wage law in California is intended to improve the standard of living for workers in the fast food industry and of course, this is a good thing for workers but there is a business that operates behind that fast food job and fast food brands in business to make profit. The sad truth is for customer facing businesses, labor is the cost to be reduced when belt tightening is necessary. Managers and supervisors of these locations will have to ‘do more with less’ as frontline teams are pared down and individual hours are reduced. Motivating staff to become even more productive in this environment will be the next big challenge for fast food leadership.
The Bottom Line
California has boosted the minimum wage for fast food workers to $20 per hour in the vain of helping cope with out of control cost of living increases. In reality, the immediate effects on business have been negative as the state reels with fast food outlet closures, price increases and reduced hours for staff that still remain. The state government may have lost sight of what it means to have a ‘first job’ as the mandatory wage increase has made these once easy to get entry level positions much more difficult to obtain. Illogical and suspicious exemptions for certain fast food brands and the entire retail sector makes the mandate that more sketchy. The gradual elimination of fast food jobs in California will only have adverse effects in the long term as unemployment will rise among the ranks of younger workers. Also lost is valuable field and ethics experience that new workers learn and take with them to their permanent vocations. Paying a decent wage for an entry level position is not wrong on many levels but mandating large wage increases for jobs that have always been on the lower end of the pay scale can only cause more economic hardship for this group of workers as businesses are concerned about one item on the ledger, the bottom line.