(The Center Square) – California’s $20 per hour fast food minimum wage effectively creates a new statewide minimum wage, businesses say, and could lead small businesses to shut down as they struggle with rising costs and competing with large, corporate fast-food franchises for workers.
Small businesses are “still clawing back from the pandemic. A lot of folks are barely breaking even, not to mention all the costs that have increased around what it takes to run a business,” said Megan Gamble, California Restaurant Association Vice President, to The Center Square. “There are all these pressures these businesses are under so these little mom and pop shops are the ones with even more limited resources to address increasing labor costs.”
In 2019, Walmart’s CEO called upon Congress to raise the national minimum wage, spurring concerns by small business owners that “more than doubling the minimum will increase expenses, lead to layoffs, and potentially shutter businesses.”
“What we are hearing from small business owners is their inability to compete with the fast food companies that have now pegged this minimum wage so high. We’re also finding that many of the franchisees themselves are in a box and have been faced with the difficult decision of scaling back positions, shifts, and even closing their doors,” said California Executive Director John Kabatek of the National Federation of Independent Business, a nationwide organization representing small businesses, to The Center Square.
Kabatek said after West Hollywood raised its minimum wage to $19.08 last summer, one of his members “tried to do everything he could to make it work, including cutting his staff from 50 to 30 and rolling out a more limited menu. But higher wages and a pullback in customer spending forced him to close his doors in February.”
“That was $19.08 per hour. Imagine what $20 will do to these franchisees and so many in their communities,” Kabatek continued.
In response to the new fast-food minimum wage, operators have announced price increases, mass layoffs, and more automation. The wage increase is estimated to cost typical restaurants $250,000 per year, a cost that many small businesses already struggling to break even amid widespread inflation struggle to afford.
“This minimum wage, while well intentioned by some, is going to bear long term scars for most,” Kabatek concluded.
California Governor Gavin Newsom’s own PlumpJack restaurants are only offering $16 per hour in Olympic Valley, where the median rent at time of publication is $3,200 per month. Earning $16 per hour while putting half of one’s earnings into such rent would require working 400 hours per month; a typical 40-hour workweek yields 160 hours of work per month, suggesting tackling higher costs for all — especially in housing — could be a more efficient policy tool for growing real wages.
