California fast-food workers are now making $20 an hour. Other businesses might have to catch up

As
fast-food
chains
in
California
start
to
pay
their
workers
a
higher
minimum
wage,
other
business
owners
across
the
state
are
watching
to
see
whether
they
will
have
to
raise
their
own
pay
to
compete.

Starting
Monday,
fast-food
workers
in
California
at
chains
with
more
than
60
national
locations
earn
$20
an
hour,
higher
than
the
state’s
broader
minimum
wage
of
$16
per
hour.
The
new
pay
floor
stems
from
a

state
law
passed
in
September,
which
also
establishes
a
nine-person
council
that
will
determine
future
wage
hikes
and
suggest
other
guidelines
for
labor
conditions
for
the
industry.
There
are
more
than
half
a
million
fast-food
workers
in
the
state,
Gov.
Gavin
Newsom
said
when
signing
the
bill
into
law.

Some
affected
chains
have
responded
to
the
mandated
wage
hike
by
slashing
their
workforces
and
hiking
their
menu
prices.
Franchisees
for
pizza
chains


Papa
John’s,
Round
Table
and


Pizza
Hut
laid
off

drivers
ahead
of
the
deadline.


McDonald’s,


Wingstop
and


Chipotle
Mexican
Grill
are
among
the
chains
that
have
said
they’ll
pass
on
the
higher
labor
costs
to
their
customers
by
making
their
menu
items
more
expensive.

“The
consequences
are
business
owners
—
franchisees
who
are
not
large
companies,
despite
what
the
political
supporters
of
this
law
have
said
—
these
are
small
businesses
and
they’re
facing
now
mandated
higher
costs.
And
those
costs
are
going
to
get
passed
on
to
the
customer
and
will
likely
result
in
fewer
jobs,”
Matthew
Haller,
president
and
CEO
of
franchisee
advocacy
group
the
International
Franchise
Association,
told
CNBC.

The
law
won’t
directly
touch
other
restaurants
in
California
—
small
coffee
chains,
mom-and-pop
diners
and
upscale
steakhouses
—
but
they
still
could
have
to
adjust
their
pay
as
they
compete
for
the
same
employees.
And
industries
that
rely
on
hourly
workers,
such
as
retail
and
hospitality,
may
also
face
pressure
to
match
their
wages
or
risk
losing
their
employees.

“I
think
we
are
going
to
see
spillover
effects
within
food
service,
but
beyond
that,
we
should
expect
to
see
spillover
effects
to
other
industries
that
are
competing
for
this
talent,”
Daniel
Zhao,
lead
economist
for
career
site
Glassdoor,
told
CNBC.

The
law
takes
effect
as
job
growth
has
slowed
in
the
most
populous
U.S.
state.
California’s
unemployment
rate
was
5.3%
in
February,
outpacing
the
U.S.
rate
of

3.9%,
according
to
the
Bureau
of
Labor
Statistics.

While
the
new
fast-food
minimum
wage
is
among
the
highest
in
the
U.S.,
California
employers
are
used
to
paying
more
for
their
labor.
Roughly
three
dozen
California
cities
and
counties
have
local
minimum
wages
higher
than
the
state
pay
floor
of
$16
an
hour.

Even
when
it
is
not
mandated,
restaurants
usually
find
themselves
paying
more
than
the
minimum
wage
to
attract
hourly
workers.
For
years,
the
industry
has
struggled
with
a
labor
crunch
as
teens
seek
out
internships
instead
of
restaurant
jobs
and
older
workers
decamp
for
other
industries
with
better
working
conditions
and
benefits.

The
average
wage
for
hourly
food
service
workers
in
California
before
the
law
took
effect
was
$17.89
an
hour,
according
to
self-reported
Glassdoor
data
from
Oct.
1
to
March
28.
But
only
22%
of
the
state’s
hourly
restaurant
workers
were
making
at
least
$20
an
hour
in
that
time.

The
pay
hike
will
have
a
bigger
effect
on
fast-food
restaurants
in
areas
with
lower
costs
of
living,
such
as
Fresno,
according
to
Zhao.
In
major
metropolitan
areas,
the
gap
between
prior
pay
rates
and
the
new
minimum
wage
is
likely
smaller.

For
example,
at
Andytown
Coffee
Roasters
in
San
Francisco,
non-tipped
employees
already
make
more
than
$20
an
hour,
according
to
owner
and
CEO
Lauren
Crabbe.
She
said
she’s “personally
thrilled”
that
fast-food
workers
for
large
chains
will
earn
a
higher
wage
in
California,
though
she
thinks
the
legislature
missed
an
opportunity
to
target
giants
in
other
industries,
such
as
retail.

“If
a
multinational
company
making
millions
in
profit
cannot
afford
to
pay
the
people
making
their
product
and
serving
their
customers
at
least
$20
[an
hour]
in
2024,
then
they
do
not
have
a
viable
business
model,”
Crabbe
said.

The
chief
executive
of
the


Cheesecake
Factory
isn’t
sweating
the
wage
hike,
either.
As
a
full-service
restaurant
chain,
the
company
won’t
be
obligated
to
pay
its
California
workers
$20
an
hour.
But
CEO
Matthew
Clark
said
on
the
company’s
earnings
call
in
February
that
the
chain’s
tipped
positions
already
make
much
more,
and
he
believes
that’s
the
case
for
fast-food
workers,
too.

“Many
of
the
California
[quick-service
restaurant]
urban
locations
are
already
paying
$19
and
$20,”
he
said. “We
believe
that’s
partly
why
they
agreed
to
do
it
in
the
first
place.”

Businesses
outside
the
restaurant
industry
are
also
eyeing
the
wage
increase
for
fast-food
workers.

Jennifer
B.
Perez
runs
Growing
Roots
in
Long
Beach.
The
company
has
13
employees
and
has
been
in
business
since
2002,
designing,
installing
and
maintaining
indoor
plants
for
commercial
and
residential
clients.

Perez
monitors
hikes
in
industries
outside
her
own
to
remain
competitive.
She
gave
workers
raises
this
year
ahead
of
the
fast-food
hike.
Workers
without
experience
are
making
$19
an
hour,
she
said,
on
the
lowest
end
of
her
pay
scale
and
more
than
$2
above
the
local
minimum.
They
also
have
paid
time
off,
and
health,
vision
and
dental
insurance.

“It’s
a
ripple
effect,
because
I’m
not
part
of
that
industry,”
Perez
told
CNBC
of
the
fast-food
increase. “I’m
always
over
minimum
wage,
but
since
that
keeps
increasing
and
increasing,
and
it’s
a
25%
increase
from
$16
to
$20,
it’s
definitely
something
to
think
about.”

Like
many
business
owners,
Perez
has
to
consider
how
inflation
affects
both
her
company’s
labor
costs
and
her
clients’
budgets.

“Most
small
businesses
can’t
just
do
a
straight
25%
increase
across
the
board,
or
price
increases
across
the
board,”
she
said.

From
start
to
finish,
the
California
law,
which
was
backed
by
the
Service
Employees
International
Union,
has
been
controversial.

The
restaurant
industry
fought
back
against
the
initial
incarnation,
which
Newsom
signed
into
law
in
2022,
by
gathering
enough
signatures
for
a
referendum
to
make
California
voters
decide
on
the
matter.
The
SEIU
responded
by
backing
a
bill
that
would
impose
joint-employer
liability
on
franchised
businesses,
holding
franchisors
like
McDonald’s
responsible
for
labor
infractions
committed
by
their
franchisees.
The
two
sides
came
to
a
deal
in
September,
resulting
in
the
new
law
and
doing
away
with
the
joint-employer
provisions.

Newsom
came
under
fire
in
February
after
Bloomberg

reported
that
a
carve-out
for
restaurants
that
bake
their
own
bread
on
premise
benefited
the
governor’s
donor
Greg
Flynn,
owner
of
the
Panera
Bread
franchisee
Flynn
Restaurant
Group.
Newsom’s
office
denied
the
story
and
said
that
Panera
would
be
required
to
pay
its
workers
at
least
$20
an
hour.
Flynn
later
said
that
all
his
California
locations
will
raise
their
pre-tip
wages
to
$20
an
hour
or
higher,
effective
Monday.

After
one
contentious
victory,
the
SEIU
is
gearing
up
for
more
fights
for
similar
raises
for
fast-food
workers
in
other
states.
SEIU
President
Mary
Kay
Henry
told
CNBC
that
New
York,
Washington
and
Illinois
are
all
potential
battlegrounds.
 

“It’s
taken
us
10
years
to
get
to
this
table.
And
[the
workers]
feel
like
they’re
going
to
have
a
voice
on
the
job
that
they’ve
never
been
able
to
experience
before,”
Henry
said.

California
will
test
how
the
sector-specific
minimum
wage
affects
workers,
their
employers
and
the
broader
labor
market.
Fast-food
chains,
industry
experts
and
economists
will
be
watching
to
see
if
the
gloomy
predictions
for
job
losses
come
to
pass
—
or
if
higher
pay
comes
with
benefits
even
for
the
businesses
dispensing
the
wages.

Glassdoor’s
Zhao
said
the
$20
wage
could
lure
back
some
of
the
workers
who
left
their
restaurant
jobs
to
work
at
an
Amazon
warehouse
or
to
drive
for
Uber.
Plus,
those
fast-food
workers
will
now
have
more
money
in
their
pocket.

“Folks
who
are
earning
more
money
can
also
spend
more
money
that
gets
re-injected
into
the
economy,”
he
said.