The Wall Street Journal (WSJ) reported on the 4th that the minimum wage for employees of major fast-food chains in California will rise to $20 starting in April, and large restaurant chains are predicting price increases.
According to reports, Mexican fast food chain Chipotle plans to increase menu prices at its California stores by 5 to 9 percent to cope with rising labor costs. After raising menu prices four times over the past two years in response to rising prices, additional price increases were announced in response to rising labor costs.
The WSJ reported that other fast-food companies, including McDonald’s and Jack in the Box, are also planning to increase menu prices at their California stores this year to reflect rising labor costs. The McDonald’s Store Owners Association estimates that the additional increase in labor costs this year will amount to $250,000 per year per store. This reflects the fact that the minimum wage for fast food industry workers in California will increase to $20 per hour starting in April. Considering that the current minimum wage for fast food workers in California is $16, the increase rate amounts to 25%.
Previously, California passed a bill in 2022 granting oversight of the fast-food industry to a state-appointed committee. The bill would allow the commission to increase the minimum wage to $22 per hour. As the fast-food industry strongly opposed the passage of this bill, labor unions, employer groups, and the state government reached a compromise that would set the minimum wage at $20 per hour after April 2024 and limit annual minimum wage increases from 2025. There is a bar.
Consulting company Levine Management Solutions also released an analysis showing that a $1 hourly wage increase in the fast-food industry would lead to increased costs, leading to a 2% increase in menu prices. WSJ predicted, “Eating out at restaurants in California is one of the most expensive places in the U.S., but it is expected to become more expensive in the future.”
Mainstream economists have opposed the introduction or increase of the minimum wage on the grounds that it leads to a decrease in employment for low-income people and causes economic inefficiency. In a 2021 report, the Congressional Budget Office (CBO) said raising the federal minimum wage to $15 an hour would help lift hundreds of thousands of people out of poverty, but would also lead to higher prices, slower growth, and a loss of as many as 1.4 million jobs.