California fast food workers hail wage hike, franchise owners worried

Apr 4, 2024 1:11 am | News

By Nathan Frandino and Dylan Bouscher

SAN JOSE/HAYWARD April 2 (Reuters) – About half a million workers at California fast food chains began receiving a $20-an-hour minimum wage on Monday, and the increase had some small business owners questioning their future, even as workers said the raise helps pay the bills. The pay boost, from the state’s $16 minimum, followed negotiations between groups representing workers and restaurants. It applies to chains with 60 or more locations nationwide. Governor Gavin Newsom, who signed the compromise into law last September, said one goal is to make the state’s economy more inclusive.

To Brian Hom, 66, it feels the opposite.

For seven years he and his wife have owned two Vitality Bowls superfood café franchises in South San Jose, and now have about three dozen employees, mostly young adults in high school and college.

“It’s kind of a catch 22, where people want higher wages,” said Hom, who until last week paid the city’s minimum wage of $17.55. “But at the same time the costs to run the business… It doesn’t work out.”

Hom has increased prices 5% to 10% in response. He has not cut hours yet but said he was looking at staffing levels across the two locations.

“Eventually, as time goes on, if the cost of wages and cost of labor is too high, if we’re not making a profit, we would have to close down,” Hom said.

Workers hailed their raise.

“For me and my family it means support, because when you have a raise, you already have extra money with which you say ‘well, today I can afford this bill, I’m no longer so worried because where am I going to get that money or do something extra, work on something extra to get that money,” said Ingrid Vilorio, 43, who has worked at Jack in the Box for four years.

The economic bottom line is not clearcut. Some studies suggest a higher minimum wage can reduce hours and hiring, while others point to better outcomes for workers.

It was also unclear how much pressure other businesses would feel to raise their wages to match those affected by the law.

In California, a 2022 study showed, fast food workers earned on average just over the state’s $16 minimum wage, while the average non-fast-food service worker earned just over $19.

In Hayward, where Vilorio works, the minimum wage for businesses with more than 26 employees has been $16.90.

The new higher wage “somewhat alleviates the heavy cost of living in California,” said Vilorio, who also works as a beautician. (Additional reporting by Liliana Salgado, writing by Ann Saphir; Editing by David Gregorio)

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