The LA Times reports today on the impact of raising the fast-food minimum wage in California to $20 per hour:
Chipotle, McDonald’s, Starbucks, Jack in the Box and Shake Shack are planning to raise menu prices. Fast-food franchisees are laying off employees or cutting their hours. Smaller independent business owners, meanwhile, worry their workers will bolt unless they also increase wages.
Think what you will about burger flippers earning $20 an hour, but the median wage of fast-food workers in California is currently about $18 an hour.¹ So this is an average increase of 12%. And the overall impact? "David Neumark, a minimum-wage expert at UC Irvine, estimated that overall prices will rise between 2.5% and 3.75%."
A 12% raise is substantial, but the market would have produced the same thing in three or four years. This is honestly not that earth shattering.
¹The May 2023 figure from the BLS was $17.63. Fast food wages since then have risen 2.5%, bringing it to $18.07 per hour.
This will be an interesting experiment. Will this new wage structure reduce employment? Increase employment? We will see..
Australia has had higher minimum wages than the US for decades - it’s currently over AUS$23 or approx US$16 an hour - and somehow they have plenty of fast food restaurants charging about the same as we charge in the US for Big Macs. I think CA fast food will survive.
Austin - as someone who worked and lived in Sydney, your statement is true but incomplete.
Australia has basically zero undocumented. Because of a lack of surplus, low skilled labor, Australia has higher wages and uses more technology. It is far from an apples to apples comparison.
I just got back from traveling around Australia for the past two months. I have to admit that I did not once step into a KFC, Hungry Jack, or Maccie's, so I didn't get an up-close look at the fast food scene. In general, food costs seem to be somewhat higher than in the US (including at the supermarket), but overall cost of living covers roughly the same range: expensive in big cities like Sydney or Melbourne, average in medium-size cities like Perth or Adelaide, less expensive in smaller cities like Hobart and in less urban areas.
in addition to a high minimum wage (and virtually no tipping), service workers get extra pay for weekends and holidays. Some places correspondingly add a surcharge on those days, but it's uncommon.
The weirdest pricing policy I saw was at a bakery that (a) did not accept cash, and (b) added a surcharge for credit/debit card transactions.
Its not a good experiment because of the lack of controls and the people who want to bring their own biases and prejudgements to the 'analysis'. See your own comments below for good examples.
the NYComPost finds it earth shattering
https://nypost.com/2024/03/25/business/california-chains-slash-workers-as-20-an-hour-minimum-wage-looms/
Yeah, slash workers and serve fewer customers. That's certainly a plan. A weird one.
It is. It's just the first salvo in this specific battle of Capital and Labor War.
Shirley this is the opportunity AI has been awaiting? …
It planned it that way...
Haven't you watched "Person of Interest"--AI is here!
It isn't from the perspective of a retired former marketing exec. It isn't from mine, either.
But I remember what living paycheck-to-paycheck is like. I couldn't save anywhere near 12% of my take-home. This is a large quality-of-life improvement for working-poor folks.
We will see when and how fast robots / automation are added. At some point the robots get cheaper than humans and some jobs will be gone. I suspect that we are close to the transition point now. Higher minimum wages mean that workers whose value add productivity is not higher than their wages are effectively unemployable.
This isn't a bad thing. People should be paid what it costs to thrive.
I like that formulation. I have long been an advocate for a living wage, but I have always thought that that should go beyond mere subsistence.
I suspect that the actual physical tasks of making food are actually pretty far beyond what a robot is capable of for the next decade or two.
Productivity is a measurement that applies to production systems, not to individual human beings. This has been true since hominids started using tools.
These employees tend to spend all their income immediately, so demand is increased for lots of stuff besides fast food. Retail clerk is the most common job, so this adds up to a major increase in demand, which is good for the economy - this normally outweighs the increase in prices.
When CEO's get a raise, there's not so much increase in demand except in the yacht industry and other luxury things which are only a small part of the economy.
This is honestly not that earth shattering.
Kevin, it is the END OF AMERICA AS WE KNOW IT!! People who are by nature Undeserving (we know this because the Lord has not blessed them with Prosperity) are going to be receiving more money anyway, and WE will be the ones to pay the price! My order of McNuggets may be a DOLLAR OR TWO HIGHER! It's an OUTRAGE!!
And of course Joe and Kamala and Nancy and Hillary won't do a damn thing about it. Blah blah fair market blah living wage blah. Mister Trump would NEVER let something like this happen!
They'll switch to some form of gig economy. Get an account with McJob app, sit through required training. Have your phone nearby when a shift opens, hurry your ass in or get cut out by another working stiff.
But hey the benefits aren't bad...oh wait.
Currently in Los Angeles, every Pizza Hut has a little sign on its front counter saying that they have to charge more because of the high cost of doing business in California, curious to see if any other companies adopt this petulant and dishonest tactic.
Petulant, sure. I don't see it as dishonest, just... extremely petty and dumb.
San Francisco has stronger health-care requirements for workers than most other places in CA. Some restaurants (mostly fast food chains) have signs up whining about that, too.
So the fast food joints that have "help wanted" signs out and complain they can't get any workers are complaining the workers they can not find will have to be paid a fraction more?
You will find more workers if you pay them less? I don't think that is how supply and demand works.
I would be very interested to hear a rational counterargument (as opposed to Fox news-style propaganda) opposed to raising the minimum wage in question.
And I feel that statements like this one could be profitably (pun!) unpacked quite a bit more:
"A 12% raise is substantial, but the market would have produced the same thing in three or four years."
How certain can we be of that assertion? And, if it's true, why not then simply allow the market to bring about that rise in wages at that slower rate? Wouldn't the employers and the customers then be better equipped to keep up with the additional expenses involved? At what point do government (or popular) mandates become more destructive than constructive?
I am motivated at least in part by the fact that I live in an area that has enacted some mandated raises in the minimum wage. Thanks to some business devastation resulting from many years of the recent plague, it's very difficult to know what the situation might have been like in the absence of Covid.
And I am not a business owner myself. But I will say that through personal interactions, email groups, or online chats I have heard or read feedback from local business owners who find the mandated rise in minimum wages to be difficult to keep up with.
One shop owner in particular, an acquaintance of mine, owns one of my favorite stores in my area. And he says he would have closed up shop in response to the mandates except that he started a subscription service where a large number of people (including me) began paying a (sizeable!) annual fee for his monthly selected products. He had to take a drastic step to keep up with what he felt was a drastic mandate. In other words, he claims that he barely survived.
And this guy is a die-hard Liberal. He is not the hyperbolic right-wing type going on about the oppressive hand of authoritarian Democratic regimes. If he says that a mandated rise in wages almost put him out of business, I'm inclined to believe him.
And Kevin, for the most part, appears to present the situation as a fairly simple one. Assuming that's a fair characterization of his perspective, I disagree with him on that point. It's not simple. And I'd be quite interested in a further exploration of the opposition.
Translation: Our froggy little troll is begging for someone -- anyone -- to play with him on his terms.
Fuck off, Leo.
How does the increased wage compare with the cost of housing in California? What percentage of take-home pay does a "typical" apartment cost? What about a "typical" mortgage?
Without knowing the cost of living, it really isn't possible to judge how "reasonable" the wage level is.
I associate with a lot of old guys who insist only kids living comfortably at home work in fast food outlets. And they can't see how "burger flipping" (much less running the cash register) can possibly be worth even $8 per hour, let alone $15 -- or now, $22!! Of course, they'd have no problem accepting some executive of the same company pulling down $100 million.
"A 12% raise is substantial, but the market would have produced the same thing in three or four years."
Is that true?
Follow up question. Is that corrected for inflation?
Until now, a lot of fast food businesses have been effectively paying ca $20/hr by having customers "tip" everyone, including just for handing you your cup of burned mud, I mean Starbucks coffee. Employers didn't have to pay payroll taxes on those benefits (assuming they actually went to individual employees), so it was a convenient way of goosing pay by pushing the cost directly onto the customer. Maybe now we'll see those annoying tip screens go away and workers will just be making a straight-up wage. I don't mind paying $1.00 more for a burger as opposed to being asked to add $2 or $3 to a take out order a guy just stood there and rung up.
Wow. It has taken this long to catch up to the minimum wage I made in 1968 when I was 15 - $1.60/hr. Worth about $25 today.