Data shows that jobs and working hours in the fast food sector have been reduced. | Photo: Shutterstock
California’s fast-food industry wasn’t crying wolf when it warned of the significant consequences of the state’s new $20 minimum wage for most fast-food workers, according to a new study from a group opposed to the wage increase.
The study, based on a survey of 182 fast-food operators, found that two-thirds (67%) of affected employers expect the wage increases to cost them at least $100,000 in the first year. About one in four respondents estimate the impact will be a $200,000 increase in annual labor costs in the second year.
Almost all (98%) said they had already increased prices, and almost the same percentage (93%) said they expected another increase in the second year of the wage increase.
Similarly, according to the survey, a large proportion of affected employers (70%) have cut jobs and reduced working hours (89%). Almost the same percentages are planning further restrictions next year, with 74% saying they will cut jobs and 87% expressing their intention to prevent employees from working overtime.
The figures are the bleakest ever released since the new minimum wage went into effect April 1. The new minimum applies to employees at most fast-food restaurants in the state, which has at least 59 sister units nationwide.
But those statistics are contradicted by other data, including from the federal government. Figures from the U.S. Bureau of Labor Statistics show that fast-food chains in the Golden State had more workers in April, after the minimum wage increase, than they did a year earlier.
Job growth has slowed, the bureau said, and some industry officials note that the BLS figures have not been seasonally adjusted and are therefore somewhat distorted.
The new study was conducted on behalf of the Employment Policies Institute, a nonprofit group run by the Washington, D.C.-based, employer-backed government affairs firm Berman and Associates. The firm is known for its aggressive lobbying style.
“Even before the $20 minimum wage was put in place, fast food chains made it clear they couldn’t survive,” Rebekah Paxton, research director at the Employment Policies Institute, said in a statement. “Now, just months into the measure, it’s a disaster, destroying jobs and closing restaurants.”
The data released by the group does not indicate how many fast-food restaurants have closed or opened since the minimum wage increase took effect. But 74% of respondents said the chances of being forced to close their restaurant have increased since April 1.
Additionally, 89% of respondents said they were less likely to open another restaurant in California, while 59% said they would focus their expansion on areas outside the state.
The data also does not reflect the evolution of respondents’ turnover figures. Yet they are not optimistic. About 92% of them said they expected a decline in traffic; about half of them described the anticipated decline as “significant.”
California Gov. Gavin Newsom has estimated that the new minimum wage would apply to about 580,000 workers in the state. On July 31, a quasi-governmental body called the Fast Food Council will meet to discuss whether the minimum wage should be adjusted again on January 1.
The law that created the council and set the minimum wage at $20 allows the wage board to increase the minimum wage by up to 3.5 percent per year.
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Peter Romeo has been covering the restaurant industry since 1984 for various media outlets. As editor-in-chief of Restaurant Business, his current areas of focus are government affairs, labor and family dining. He also serves as the publication’s unofficial historian.
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