According to the survey report released by the Washington, D.C. lobbying organization, the Employment Policy Institute, on the 19th of this month, two-thirds of California fast-food restaurant operators who participated in the online survey stated that as a result of California’s new minimum wage law, the operational costs for each of their stores will increase by at least $100,000 per year.
Approximately 26% of respondents indicated that they estimate an increase of over $200,000 in annual costs per store.
In June and July, a total of 182 operators participated in a survey regarding their opinions on California’s new minimum wage law. The new regulation mandates that fast-food chain restaurants with over 60 locations nationwide must pay employees a minimum wage of at least $20 per hour starting from April 1.
Rebekah Paxton, the research director at the Employment Policy Institute, stated in a statement sent to Epoch Times that prior to the implementation of the new hourly wage standard, fast-food restaurants had already expressed difficulties in sustaining operations. Now, just a few months later, this policy has had disastrous consequences, resulting in job losses and restaurant closures.
The report did not specify how many restaurants had closed, but a study released by the restaurant tech company, Snappy, on the 10th of this month found that since April 1, 897 fast-food restaurants in California have permanently closed.
Paxton remarked that state officials “should listen to the voices of small business owners and employees rather than obscuring the facts.”
However, Alex Stack, a spokesperson for the California Governor’s Office, countered by stating that the survey was “an online survey conducted by a Washington, D.C. lobbying firm.” He claimed that federal government data shows that employment in the fast-food industry has increased since the implementation of the new minimum wage law.
Labor statistics indicate that job opportunities in California have increased for five consecutive months. Over the past year, the fast-food industry in California has added nearly 3,000 jobs; as of May this year, approximately 745,600 people were employed in this sector in California.
However, the Employment Policy Institute pointed out that the data cited by the Governor’s Office is inaccurate due to lack of seasonal adjustment, and cited Federal Reserve data showing that since January, the fast-food industry has lost around 6,300 job positions, with a decrease of approximately 3,000 jobs since the new law took effect.
Paxton commented, “Employees are being laid off, restaurants are closing or moving out of California, and the frequency of customers dining out is also decreasing. This is bad news for employees, restaurant operators, and California consumers.”
When asked about the impact of rising costs, 98% of operators stated that they had already increased menu prices. Believing that consumers are becoming increasingly price-conscious, 92% of restaurant owners anticipate that price hikes will reduce foot traffic.
To reduce costs, 89% of respondents stated that they are reducing employees’ working hours. Nearly three-quarters of people mentioned they are restricting overtime, while 70% indicated that they have reduced the number of employees or merged positions.
75% of operators estimated that the number of employees per store would decrease; 25% believed that the number of employees would “significantly decrease.”
In recent months, some restaurants have already closed their branches in California, with close to three-quarters of operators stating that the likelihood of them closing restaurants has increased.
Regarding future investment plans, 89% of business owners stated that they do not intend to expand their operations, and 73% said it is “highly unlikely” for them to open more branches.
59% of operators expressed that they are more inclined to expand investments outside of California now.
Considering the short duration of the implementation of the higher wages, determining its impact up to now poses a challenging task.
However, after approximately three months since the new law has been enforced, 93% of respondents stated that they will have to raise menu prices again within the next year, 87% will cut hours, and 74% will reduce staff.
In California, some fast-food chain restaurants charge significantly higher prices for the same items compared to other states. For example, Del Taco’s website shows that a combo of two tacos costs $14.79 in California, whereas it is $8.79 in Ohio.
According to Grubhub’s data, the current price of a Big Mac meal in California is $13.69, almost $5 higher than the average price of $8.79 in Texas.
Some businesses are focusing on improving efficiency by increasing automation through the use of robots and artificial intelligence, reducing the required number of employees.
Furthermore, some businesses, including Taco Bell and El Pollo Loco restaurants in Northern California, have already installed self-service kiosks in their lobbies. This not only reduces the need for front desk staff but also allows employees to move to the kitchen and other positions.