Earlier this year, a minimum wage increase was announced for many fast-food establishments in California, sparking national attention and posing challenges for some businesses.
Customers in certain cities in California seeking their favorite treats from Fosters Freeze or Mod Pizza may be disappointed to discover that several locations have shut down unexpectedly.
The employees, who arrived for their shifts only to learn that their jobs had been terminated without prior notice, were particularly taken aback by the closures. A former employee of Fosters Freeze revealed that while the owner had expressed concerns about the financial strain caused by the minimum wage hike, there was no indication that the restaurant would be closing down.
Ahead of the scheduled minimum wage hike, Mod Pizza closed five of its California locations. Employees at one of these locations were informed of the closure just two days before it happened. In a public statement, Fosters Freeze owner Loren Wright criticized the new minimum wage regulations, attributing them to the downfall of the business.
“Small businesses can’t survive a 120% plus [minimum] wage increase over the last 10 years,” Wright said. “We are all more broke than we were 10 years ago. It’s clear raising [minimum] wage isn’t helping.”
Last year, California Governor Gavin Newsom signed California Assembly Bill 1287, which implemented the increased minimum wage for fast food workers, sparking widespread debate and attention from both politicians and the public.
Following the bill’s enactment, around 10,000 fast-food positions in California have been cut, with experts predicting further job losses in the industry as businesses struggle to cope with rising labor expenses.
Popular eateries like Wendy’s, Chipotle, and Starbucks have proactively raised their prices in response to the wage increase. Over the past month, their prices have surged by 8%, 7.5%, and 7% respectively.
Numerous other fast-food chains are also adjusting their prices to offset the higher labor costs, aiming to transfer the burden to customers through menu price revisions.
The controversy surrounding the minimum wage adjustment has raised questions about whether fast-food workers should earn more than those in other industries. It’s noteworthy that the state minimum wage for non-fast-food industries in California stands at $16 per hour.
Since July 2009, the federal minimum wage has remained unchanged at $7.25 per hour, with no adjustments made at the national level.
Critics of California Assembly Bill 1287 have raised issues regarding its exemption for restaurants that bake their own bread and sell it separately. This exemption notably benefited Panera Bread, a significant political donor to California Governor Gavin Newsom who owns certain Panera Bread locations in the state.
Several states have taken the initiative to set higher minimum wage rates, with Washington D.C. leading the way by paying its minimum wage workers $17 per hour.
Despite ongoing political discussions, wage levels have remained stagnant despite the rising cost of living. Concerns about the financial burden on small businesses have been a key factor in opposing wage increases.
Greg Flynn, the owner, has aligned with Governor Newsom in refuting claims that the exemption was specifically granted for his benefit. Flynn has committed to upholding the $20 minimum wage for his California workforce.
While restaurant owners who have closed their establishments post the new legislation attribute their actions to increased labor expenses, they have not addressed why they failed to inform their employees in advance about the impending job losses.
As a result, the affected employees are now confronted with a difficult path forward, as numerous other restaurants have implemented hiring freezes. Those establishments that are still hiring are likely to face a surge in job applicants.
