Jul 30, 2024
Lawrence Cheng and his family own seven Wendy’s locations south of Los Angeles. But this busy summer season, he has fewer staff clocking in to help him.
Cheng told the Associated Press he’s been cutting his staff’s hours due to the increase in California’s minimum wage for fast food workers, which jumped from $16 to $20 per hour this past April.
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He’d usually have a dozen staff per shift, but now he only schedules seven, due to this 25% increase in their pay.
“We kind of just cut where we can,” Cheng says. “I schedule one less person, and then I come in for that time that I didn’t schedule and I work that hour.”
California Gov. Gavin Newsom has said that he signed off on the minimum wage hike to help the state’s half a million fast-food workers access higher wages. But has it created a new problem for workers instead?
Restaurants feeling the heat
Cheng’s not the only franchise owner struggling to make up those extra labor expenses.
AP spoke with Juancarlos Chacon, an owner of nine Jersey Mike’s in Los Angeles, who says that labor accounts for about 35% of his total costs. With the minimum wage hike, he’s not only cut staff, but also passed some of the additional labor cost onto his customers.
“I’ve been in the business for 25 years … and I never had to increase the amount of pricing that I did this past time in April,” Chacon said.
He gives the example of a turkey sub. It used to be $10, but now it’s $11.15. And now, Chacon told AP that he sees customers cutting back, even when they do come in. They may buy a sandwich, but no extras, like chips or a drink.
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California soft-serve chain, Fosters Freeze, had to close one of its stores because it couldn’t afford to pay workers after the increase. Monica Navarro, a former assistant general manager at that location, explained to Fox Business that this isn’t helping her or her employees.
“We would have rather stayed at the wage that we did have before, just because now we don't have a job,” she said.
Navarro added that even the workers who received the $20 hourly increase aren’t finding the change entirely positive: “They got their hours severely cut and it’s a lot less people working on shifts, so their jobs got a lot more difficult.”
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The data disagrees
Not everyone believes the wage hike will ultimately lead to scores of restaurants being forced to shutter. In fact, wage increases don’t always lead to layoffs. A recent study analyzed the impacts of minimum wage hikes in both California ($8 to $15) and New York ($7.25 to $15) between 2013 and 2022. The researchers discovered “substantial” pay growth and no job losses.
So far, that seems to be holding true. The most recent numbers from the Federal Reserve and Bureau of Labor Statistics show that the jobs for limited-service restaurants and other eating places in California have remained steady since April 2024.
Joseph Bryant, executive vice president of the Service Employees International Union, was part of the movement pushing for the raise. He told AP that he’s heard mainly good things from the minimum wage hike.
“Multiple franchisees have also noted that the higher wage is already attracting better job candidates, thus reducing turnover,” he said.
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Sabina Wex is a writer and podcast producer in Toronto. Her work has appeared in Business Insider, Fast Company, CBC and more.
