New bill could raise fast-food minimum wages to $22

Local fast-food franchisees may be affected after Gov. Gavin Newsom signs bill into law creating a state fast-food council that could increase minimum wages to between $15 and $22 per hour

SACRAMENTO – Flipping burgers is now giving the economy a run for its money as minimum wage for low-income jobs continues to skyrocket.

With inflation perched on the shoulders of working-class Americans, employees struggle to keep up with the rising costs of living. To supplement this, Newsom signed Assembly Bill (AB) 257 on Sept. 5, which allows a government-run council to be in charge of fast-food workers wages, hours and working conditions. The council can decide to set the wage as high as $22 per hour. 

“The constraints of what this council may do could have ramifications that hurt local folks,” president and CEO of the Visalia Chamber of Commerce Gail Zurek said. “This isn’t just about socking it to the large international food corporation, this is going to affect local families and local workers, and frankly, the cost of our local burger too.”

The bill will allow a California Fast Food Council that is made up of “representatives from labor and management,” according to the office of Gov. Gavin Newsom’s most recent press release. The council will be in charge of wages, hours, discrimination policies and working conditions. Fast food chains are defined as restaurants with 100 locations or more in the nation. AB 257 set the capstone for the wage increase to $22, and the council cannot raise it any higher than that. Whether the council will jump all the way to $22 right away, or if they will gradually raise it within the next few years is up for their deliberation. 

“On the surface, [higher wages] sounds great. Everybody wants everybody to be able to make more money. But ultimately, what that means is higher priced goods, and I think a push towards automation in a way that the industry has been resisting,” Zurek said. 

Increased minimum wage naturally causes employers to hire fewer workers, according to the Congressional Budget Office (CBO). To supplement the rising costs of paying employees, businesses switch to non-human workers that don’t require a paycheck, like kiosks and self-checkout stations.

According to the CBO, the rise in minimum wage can cause two extreme outcomes. Workers that receive the wage increase will be pocketing more money, while other workers are laid off due to rising employment costs. The nation is already seeing unprecedented unemployment; a rise in minimum wage for food workers in the county could cause an even greater shortage of fast food workers. 

According to the Congressional Budget office, the rise in minimum wage can cause two extreme worker outcomes. Some will be pocketing more money, while others will be laid off. In today’s job market, those unemployed from low-income jobs will likely remain jobless due to such strenuous employment shortages that are a result of the pandemic and inflation. 

This leads to an even larger problem of skyrocketing unemployment. According to California’s Employment Development Department, in Tulare County alone unemployment in the food industry has reached 10.9%, ideally those numbers would only be 3-5%. This is an annual jump that is already in place due to the pandemic, among other factors. A rise in minimum wage for food workers in the county could cause an even greater shortage of fast food workers. 

“Fast food typically has allowed workers from different types of segments of our population, low skilled workers, or the disabled, who’ve been able to work in this industry very, very productively,” Zurek said.

However, there is some evidence that an increase in the minimum wage can be an overall benefit to the economy. In The American Economic Review, economists David Card and Alan Kreuger performed a study on hundreds of fast-food restaurants in New Jersey and Pennsylvania. Their research suggests that raising the minimum wage by $1 doesn’t actually mean that employers will get stuck in a rut. Raising the minimum wage actually increased spending, allowing consumers to have more funds to spend, therefore circling back to business-owners pockets. They found that increasing wages gave them enough money to actually hire more people, or to raise the wages of employees already there.

Of course, a dollar increase in wages is significantly different from a $15 to $22 per hour jump. The effects of this jump, if the council did decide to do it, could make it difficult for local franchises to keep up.

CORRECTION: This article was updated to exclude correlations between price increases and employee compensation data on Saturday, Sept. 10 at 10:58 a.m.  

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