Starting in April 2024, California’s minimum wage for fast food workers will go up from $16 an hour to $20 an hour. This will have a range of effects on these workers. Others are losing their jobs because fast food chains are cutting costs and switching to third-party delivery services. Some workers may gain from the pay raise. Gov. Gavin Newsom signed the pay hike into law in September 2023 as part of a deal between restaurant workers and labor groups.
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The deal came about as a compromise over AB 257, also known as the FAST Act. This bill caused a lot of controversy because it would have set rules for working conditions and pay and created a 10-person council to oversee fast-food chains with more than 60 locations. Early on, the pay raise might have been as much as $22 an hour.
People who work in fast food restaurants were against the bill. They said it would make their businesses subject to unfair and random rules, which would cause prices to go up, hours to be cut, and workforce losses. To fight the bill in court and in politics, the industry was ready to spend more than $100 million.
Together with Newsom’s office, they worked out a deal that kept the fight from going on for too long and made some concessions on both sides. The minimum wage for fast food workers will go up to $20 an hour by April 2024. This is more than the $15 an hour minimum pay set by the state Government. The labor groups agreed to give up on the council idea and instead make a council of nine people who will decide on the next round of wage increases for California’s fast food business until 2029.
There will be one neutral party in the council and four people from the fast food business and four people from the workers’ side. Whatever is less than 3.5% of the yearly change in the consumer price index, the council will be able to raise the hourly minimum wage every year.
What Happens
Some fast-food chains are already taking steps to deal with the higher costs of labor, which shows that the deal has already had an effect on the business and its workers. More than 1,200 Pizza Hut delivery drivers in Los Angeles, Orange, and Riverside counties will be let go next year, before their pay goes up.
Third-party delivery services like DoorDash and Uber Eats will be used instead of the chain’s own delivery services. If you want to know what Pizza Hut was going to do, you can read about it first on Business Insider. The chain told the state’s Employment Development Department about the cuts through the Worker Adjustment and Retraining Notification (WARN) Act.
So that they can pay their workers more, other fast-food chains might do the same thing and lay off workers, automate their processes, or raise prices. An analysis by the Employment Policies Institute, a conservative think tank, found that if California raised the minimum wage for fast food workers to $20, 184,000 jobs would be lost and prices would go up by 17% by 2029. Furthermore, the research revealed that the higher wages would not significantly help reduce poverty, as only 8% of the workers who would be affected reside in poor families.
The deal is seen as a win for workers’ rights and respect by some, though. That the pay increase will make life better for workers who have been having a hard time making ends meet, especially during the COVID-19 pandemic, is what they say. For the same reason, they hope that other states and businesses will be inspired to follow California’s lead and raise the minimum wage for low-wage workers. As a progressive think tank called the Economic Policy Institute says in a study, raising the federal minimum wage to $15 an hour by 2025 would help 32 million workers make more money and lift 1.3 million people out of poverty.
The End
As a result of the deal between restaurant groups and labor groups over California’s minimum wage for fast food workers, the fast food business, its workers, and its customers will all be affected in big ways. Many workers will get paid more, but some will lose their jobs and the prices of fast food will go up because of the deal. And as part of the deal, a new council will be made. For the next ten years, this council will decide the future of the fast-food business in California. Deal shows the continued argument and conflict in the US about the minimum wage. This will probably not end as the deal’s economic and social effects play out.