California set to hike wages for fast-food workers to $20 per hour

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Fast nutrient costs summation goes into effect adjacent week

Fast nutrient costs summation goes into effect adjacent week 02:30

Starting Monday, astir California fast-food workers will gain astatine slightest $20 an hr — nan highest minimum costs crossed nan U.S. edifice industry. Yet nan salary hike is sparking furious debate, pinch immoderate edifice owners informing of occupation losses and higher prices for customers, while labour advocates tout nan benefits of higher wages.

The caller law, signed by Governor Gavin Newsom past fall, takes effect connected April 1, requiring that fast-food chains pinch astatine slightest 60 locations nationwide salary workers astatine slightest $20 an hour. The intends nan state's 553,000 fast-food workers will gain much than nan state's $16 minimum costs for each different industries. 

The caller baseline costs comes arsenic nan fast-food manufacture is seeing booming earnings, pinch large chains for illustration McDonald's enjoying beardown gross maturation and wider profit margins successful caller years. That's partially owed to paper prices that person acold outpaced inflation, pinch fast-food costs surging 47% complete nan past decade, compared pinch an mean of 29% for each different prices, according to a new analysis from nan Roosevelt Institute, a nonpartisan deliberation tank.

"Prices person been truthful overmuch higher than operating costs complete nan past decade that these companies could conscionable sorb higher operating costs," Roosevelt Institute labour master Alí Bustamante, a co-author of nan analysis, told CBS MoneyWatch. "This is astir raising nan level and making judge that $20 being nan caller minimum costs puts workers connected a amended economical footing to screen their family needs."

Prior to nan April 1 salary hike, nan highest paid fast-food workers successful nan U.S. were successful Washington State, which has a minimum costs of $16.28 per hour.

What's connected nan paper — value hikes

Some California edifice owners opportunity that higher labour costs will lead to higher prices for customers, and moreover curb hiring. One California franchisee told CBS MoneyWatch that while awesome fast-food chains mightiness beryllium capable to sorb specified costs, smaller operators will struggle. 

"We aren't these large corporations pinch heavy pockets — we're not Wall Street, we are Main Street," said Alex Johnson, who owns 10 franchised restaurants successful nan San Francisco area, including Auntie Anne's and Cinnabons locations. 

Johnson's institution is taxable to nan caller costs rule because nan genitor franchisors run much than 60 restaurants crossed nan U.S.

alexjohnson-6a.jpg Alex Johnson, who owns 10 concatenation locations successful nan San Francisco area, said he whitethorn request to raise prices this twelvemonth to offset nan caller $20 minimum costs for fast-food workers. Alex Johnson

Johnson said nan costs hike comes astatine a clip erstwhile his restaurants are already coping pinch softer sales, which he attributes to consumers sapped by 2 years of elevated ostentation and nan precocious costs of surviving successful California. To offset nan caller $20 minimum wage, Johnson expects to summation prices astir 10% this year, which he plans to do successful 2 smaller increments.  

"You couldn't deliberation of a worse clip to raise prices," he said. 

The emblematic California edifice is facing an further disbursal of $250,000 annually to screen nan April 1 costs hike, according to nan Save Local Restaurants coalition, citing information from a McDonald's proprietor association. The group represents edifice owners. 

"We cognize we person to return thing astatine a important summation erstwhile you talk astir a 20%-ish summation successful wages," Chipotle Chief Financial Officer Jack Hartung said connected an net telephone past period astir nan California law.

Chipotle's 3,400 locations crossed nan U.S. could spot a 1% summation successful prices to compensate, he added. 

Starbucks told nan Los Angeles Times it plans to offset nan higher wages by boosting prices, among different measures.

"There isn't a quick-service edifice proprietor successful California who tin easy enarthrosis an contiguous 25% costs summation for each their employees," Mike Whatley, vice president of authorities affairs and grassroots defense for nan National Restaurant Association, a waste and acquisition statement for nan industry, told CBS MoneyWatch.

He added, "Consumers are starting to spot this successful paper prices, and labor crossed nan authorities are starting to consciousness it, too."

Panera franchise proprietor to raise minimum costs aft accusations of typical curen by Gov. Newsom 02:48

Some critics of nan costs rule said nan higher costs will lead to layoffs and curb hiring. Already, immoderate Pizza Hut locations successful California are readying to trim jobs, according to state labour filings. Pizza Hut didn't instantly return a petition for comment.

Johnson noted that he's not hiring astatine nan infinitesimal and plans to present much automation, specified arsenic ordering kiosks, to trim his request for quality labor. He's besides reasoning astir trading his franchise locations successful California to attraction connected restaurants successful Nevada, wherever costs are lower. 

"I activity really difficult to dainty labor fairly, but location are consequences to these actions that summation costs — we're not hiring anymore, and I'm contemplating closing aliases trading my restaurants," Johnson added. "It's a sad time."

"An system that useful for all"

Labor advocates reason nan caller rule will thief fast-food workers, who gain an mean of $16.60 an hour, aliases conscionable complete $34,000 per year, according to authorities data. That's beneath nan poorness statement for a family of 4 successful California. 

The higher salary is "a transformational measurement toward an system that useful for all, not conscionable billionaires," Tia Orr, executive head of nan Service Employees International Union California, a labour group that pushed for nan law, told nan Associated Press. 

When Newsom signed nan rule past year, he dismissed nan conception that fast-food jobs are chiefly held by teenagers, underscoring that galore households dangle connected nan jobs for income. The mean property of fast-food workers is astir 26, according to Business Insider. 

Meanwhile, dozens of states and localities person hiked their minimum wages during nan past respective years, moreover arsenic nan national baseline remains astatine $7.25 an hr — a complaint that has remained stiff since 2009. Some economical investigation has recovered that higher wages don't lead to occupation losses, while having nan upside of providing financial information to workers and boosting user spending, which stimulates broader economical growth. 

California businesses person had to digest aggregate costs hikes during nan past respective years, yet continued to operate, experts constituent out.

"You've knowledgeable minimum costs hikes successful California for complete 10 years now," Bustamante said. "You don't unfastened up a business successful California without expecting minimum costs increases."

    In:
  • Minimum Wage
  • Starbucks
  • McDonald's
  • California
  • Chipotle

Aimee Picchi

Aimee Picchi is nan subordinate managing editor for CBS MoneyWatch, wherever she covers business and individual finance. She antecedently worked astatine Bloomberg News and has written for nationalist news outlets including USA Today and Consumer Reports.