Apr 11, 2024
Some California eateries, like Pizza Hut and McDonalds, are embarking on some drastic cost-cutting measures to prepare for the state’s new minimum wage hike.
Governor Gavin Newsom is lifting the minimum wage rate to $20 an hour starting in April — a 25% increase from its current rate of $16 an hour. But not all Golden State employees are benefiting from the push for higher wages.
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Franchisees for Pizza Hut and Round Table Pizza, for example, have said they intend to lay off more than 1,200 delivery drivers this year, according to employer records submitted to the state.
Michael Ojeda worked for eight years as a Pizza Hut driver in Ontario, making hundreds of dollars a week in wages and tips. Ojeda received notice in December that his last day would be in February, reported The Wall Street Journal.
Restaurant employers are trimming staff, reducing hours
California employers are looking into ways to offset higher labor costs, like slashing staff, reducing hours, closing restaurants during slower parts of the day or serving menu items that take less time to make.
“I can’t charge $20 for Happy Meals. I’m leaving no stones unturned,” Scott Rodrick, owner of 18 McDonald’s restaurants in Northern California, told the Wall Street Journal.
And some restaurant operators have considered swapping out humans for technology, like fast food joint Jack in the Box, which is currently testing out fryer robots and automated drink dispensers. Meanwhile, fire-grilled chicken chain El Pollo Loco is automating some of its salsa-making processes.
But several chains, like McDonalds, Chipotle and Jack in the Box, are passing on the higher labor costs to customers too, by increasing menu prices in California locations.
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Restaurants are teetering on ‘a balancing act’
The WSJ reported that there were 726,600 people working in fast food and other limited-service eateries in California as of January — a 1.3% dip from last September, when the increased wages were first announced.
“This is a balancing act. Fast food operators have the dual challenges of paying workers fairly while also keeping prices affordable,” said KTLA 5 News consumer reporter David Lazarus.
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“Unfortunately, this speaks more to an unsustainable business model than it does a need to keep wages in check.”
For minimum-wage employees grappling with inflation, higher wages can be a blessing, especially when it comes to covering their day-to-day costs.
According to apartment search website RentCafe, the cost of living in California is 38% higher than the national average, with housing costing a whopping 97% more compared to the rest of the country.
Angelica Hernandez, a McDonald’s worker from Monterey Park, who advocated for the new wage law and sits on the state’s fast food council, saw her pay raised to $20 an hour in March, helping her while her family’s rent rises.
“We’re going to have to keep speaking up and striking to make sure we are heard,” she told the WSJ.
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Serah Louis is a reporter with Moneywise.com. She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.
