California, the most populous state in the United States, will implement a $20 minimum hourly wage increase law for fast food chain workers from April 1. As a result, product prices have risen and mass layoffs have occurred, causing confusion.
On March 30, Fox Business reported that chain owners criticized the hourly wage increase as a “silent tax” on consumers and feared a collapse in the fast food market.
California Governor Gavin Newsom signed a quick bill in September last year to raise the minimum wage for fast-food chain workers, who operate more than 60 locations across the United States, to $20, effective April 1.
California’s current minimum wage is $15.50 an hour. The pay increase could apply to businesses that sell ice cream, coffee, bubble tea, pretzels, donuts and other beverages or candies, making it possible for virtually any fast-food company.
Fox Business reported that just before the law went into effect, major chains such as Pizza Hut, Southern California Pizza, Roundtable Pizza and Vitality Bowles made a series of mass employee layoffs.
Pizza Hut said it would cut more than 1,200 delivery workers in December last year, and some stores have suspended delivery altogether. Round Table Pizza said it would lay off about 1,280 delivery workers this year. FAT, the parent company of Excalibur Pizza, also announced plans to lay off its employees.
The fast-food chain is also scrambling to raise prices. Fox Business quoted officials as saying that an hourly wage hike could push the price of a hamburger to $20-26 in California.
Mexican fast food chain Chipotle raises menu prices at California stores by 5% to 9% to cope with higher labor costs.
Other fast-food companies, including McDonald’s and Jack in the Box, also predicted a hike in menu prices at California stores to reflect rising labor costs this year. The McDonald’s Store Owners Association estimated that the additional labor costs will rise to 250,000 dollars per store per year this year.
California passed legislation in 2022 that gave fast-food industry oversight powers to a commission that appointed members of the state.
The bill allows the committee to raise the minimum hourly wage to $22. When the fast food industry strongly protested the law, it decided to raise the minimum hourly wage to $20 from April this year after consultations between labor unions, user organizations and state governments.
JENNIFER KIM
US ASIA JOURNAL
