When California approved a fast-food minimum wage increase last fall, workers marked the legislation as a win. The new law, which went into effect in April, bumped their minimum wages from $16 to $20 an hour.
For some fast-food diners in Boyle Heights, that means having to shell out more cash for their favorite eats. At local restaurants like McDonald’s, El Pollo Loco and KFC-Taco Bell, employees and customers say they’ve seen food prices increase anywhere between $0.25 and $2.
“It’s annoying. I feel like the prices should be lower,” said David N. who grabbed a quick bite to eat at a McDonald’s located on Soto and 8th streets. Thanks to promotions offered through the McDonald’s app, he got two burgers, fries and a large drink for almost $13, instead of the regular $18 charge. Still, David felt like the increasing menu prices were extreme and shouldn’t be passed onto customers.
“It’s unfortunate because McDonald’s is a company that could probably afford to pay people better. I understand the idea behind passing a law to raise the minimum wage because the company is not going to do it,so the state needs to step in and do the right thing,” David said.
About two miles north, Maria Garcia sat with her three children at El Pollo Loco on Cesar Chavez Avenue. She said she spent close to $70 to feed her family of four on a Wednesday evening.
“It’d be nicer if they offered more coupons to customers,” she said. “If I can’t afford it, I’m not going to come anymore.”
But price hikes may already be on the menu at the popular eatery. On a quarterly earnings call for El Pollo Loco in March, representatives for the company said that the impending operational costs would affect menu prices and labor management at stores in California once the new minimum wage took effect. The company is also investing in automation with salsa preparation machines and self-order kiosks.
According to the U.S. Bureau of Labor Statistics, there are more than 400,000 fast-food workers in California, most of which are impacted by the new law. Known as Assembly Bill 1228, the law requires fast-food chains with 60 or more locations nationwide to pay their workers at least $20 an hour. The law does not apply to some bakeries or restaurants operated inside of grocery stores.
During the bill’s signing ceremony last September, Gov. Gavin Newsom heralded the legislation as a “big deal” for workers statewide. “Eighty percent of the workforce in these fast-food places are people of color. Two-thirds are women,” Newsom said, citing a study by UC Berkeley’s Labor Center.
With fast food workers in the state now earning among the highest minimum wages in the country, restaurants are finding ways to adjust.
Kathy Fairbanks, who is part of Save Local Restaurants, a coalition that supports California fast-food franchisees and franchisors like McDonald’s, said that restaurant owners across the state will have to balance raising prices and cutting worker hours to address the increased labor cost.
“While the corporate brands can make pricing recommendations, it’s up to the small business owners, the franchisees, to figure out how to offset the significant cost that comes with $20 an hour. It’s a decision between how much to raise prices versus how much to cut workers and worker hours,” Fairbanks said.
She explained that it’s too soon to recognize how restaurant owners and companies need to further adapt to the changes, but that consumers will always be on the losing end of higher food prices.
However, some researchers consider fast-food item markups as corporate profiteering. Over the last decade, the cost of fast-food items increased by nearly 47%, while the prices of all items sold in the U.S., like gas, entertainment and groceries, in the same period only increased by 29% through inflation, according to an analysis by the Roosevelt Institute, a non-profit think tank. The price hikes and industry profits, researchers say, suggest these chains can absorb the increased cost of labor without raising consumer prices or reducing employment.
Back in Boyle Heights, a manager at a Subway who preferred to stay anonymous, said that as a result of the wage increases, some employees had hours reduced, while others were let go, resulting in a shortage of already overworked staff. Boyle Heights Beat reached out to the sandwich chain’s corporate office to confirm the claims but did not get a response.
The same manager said the company urged her store to increase prices across the menu three times since February, likely to offset the increase in operation costs.
“Some people will leave their food at the register because they didn’t think it was as expensive as it really is,” the manager said.
Brian Justie, a senior research analyst at UCLA’s Labor Center, said fast-food restaurant customers shouldn’t forget the wage increase benefits the local economy, and the lives of workers – many of them of minority backgrounds.
“This is many thousands of people with a radical improvement to their day-to-day lives. Those are the same people whose dollars that they’re receiving, are funneled back into their local communities. These are workers who spend locally,” Justie said.
None of these pundits who claim that businesses can absorb these labor costs. Without raising prices actually own or have ever owned a business. If they did they would raise prices too. The politicians in particular survive solely on money confiscated from the public. They vote themselves pay raises to keep up with inflation. Then raise taxes on something to cover it. So they’re no different than the corporation’s they hate. There’s an old saying “don’t isspy down my back and tell me it’s raining”