Some large companies were considering hiking prices on their menu to cover the costs.
Fast-food workers across the state were celebrating a boost to their minimum wage today thanks to a new California law taking effect, but some large chains were considering hiking prices on their menu to cover the costs.
The minimum wage jumped to $20 an hour for fast-food workers effective Monday. Backers of the measure — including Gov. Gavin Newsom — have called it essential to provide workers with a livable wage, but restaurant industry officials warned that it could lead to increased prices for consumers, or an increase in the use of technology that could impact jobs.
During a virtual Monday morning news conference, representatives of Service Employees International Union, which represents about 2 million workers in healthcare, public sector and property services, and the New York-based Roosevelt Institute think tank insisted that restaurant chains can absorb the increased labor cost without need for raising prices or eliminating positions. The institute issued a report last week concluding that higher wages do not have to translate to higher prices and fewer jobs.
“There is one big reason why that is, we actually point to it in our report,” Ali Bustamante, deputy director of Worker Power and Economic Security at the Roosevelt Institute said. “We find that prices over the past 10 years, over the past decade, in the fast food industry increased by 46.8%, compared to 28.7% overall (in the restaurant industry).”
“One of the reasons that the prices have gone up a lot faster in the fast food industry relative other industries is the fact that markup has also gone up, which is basically the difference between prices and the actual operation costs that businesses incur in order to render their prices,” Bustamante said.
Bustamante said the most “unrealistic assumption” puts the cost of increasing the minimum wage at $4.6 billion. He said excess profits that corporations are taking home could easily pay for it. The institute’s report found that many fast food workers in the state had already begun to earn more than $16 an hour or more, and the increase to $20 an hour for some fast food operators will not be an automatic $4 increase for each worker.
Angelica Hernandez, a fast food worker represented by SEIU, said the increase will help her breathe a “little easier” in terms of paying her rent and buying groceries. She said the wage bump is a “huge raise” and that she and her colleagues will continue to fight for better wages and working conditions.
Representatives for Chipotle, McDonald’s and Jack in the Box did not immediately respond to a request for comment, nor did officials with Yum! Brands, which owns Pizza Hut and other fast food companies such as Taco Bell and KFC.
