California has a new rule set to take effect on Monday, April 1, guaranteeing that the majority of fast food workers would get a minimum wage of $20 per hour.
The measure was approved last year by Democrats in the state Legislature to recognize that many of the more than 500,000 fast food workers are adults trying to make ends meet. The trade group that represents the franchisees of fast food restaurants backed the bill.
Reportedly, if a restaurant is a part of a national chain that has at least 60 locations nationally and offers minimal or no table service, then it is subject to the regulation. Businesses that make and sell bread separately from other menu items, as well as restaurants located inside grocery stores, are not bound to this law.
Despite Financial Stability for Workers, Food Costs May Rise
While the new rule will provide more financial stability to fast food employees, prices are anticipated to increase in a state where living expenses are already high.
According to The Associated Press, several franchise owners have expressed dissatisfaction with the law's effects since its passage, particularly in light of the sluggish economy in California.
In the San Francisco Bay Area, Alex Johnson owns ten Cinnabon and Auntie Anne's Pretzels businesses. He said that so far this year, sales were down, so he had to fire his office workers and ask his parents for assistance with payroll and human resources.
Johnson will lose almost $470,000 annually due to pay increases. He said that he would be raising costs at his stores by 5% to 15% and that he would no longer be recruiting or looking to create additional sites in California.
"I try to do right by my employees. I pay them as much as I can. But this law is really hitting our operations hard," he stated. "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."
Will There Be Job Losses?
California increased its minimum wage to $16 per hour for the majority of workers during the last ten years. As companies' expenditures rose, several workers were worried about losing their employment.
However, Michael Reich, a professor of labor economics at the University of California-Berkeley, argued that this was not true. He said wages increased, but employment remained stable.
In addition, Reich said that while the statutory minimum pay is $16 per hour, some major localities in the state have passed their own minimum wage laws that establish rates higher than that. Because of this, the transition to $20 per hour will be less drastic for a lot of fast food joints.
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