California’s Fast Food Industry Continues Cutting Employee Hours Following Minimum Wage Increase

By: Sam Watanuki | Published: Jul 10, 2024

California’s fast food industry has been grappling with a significant change since April 1, when the minimum hourly wage for fast food workers jumped from $16 to $20.

This 25% increase aims to provide a living wage for over half a million fast food workers, many of whom struggle with multiple jobs.

Impact on Staffing Levels

Lawrence Cheng, whose family owns seven Wendy’s locations, has reduced his afternoon shift staffing from nearly a dozen employees to just seven. He often fills in himself to manage the workload.

car perspective sitting in drive thru

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“We kind of just cut where we can,” Cheng explained, hoping that a busy summer will offset the increased labor costs.

Adjusting Business Operations

Juancarlos Chacon, owner of nine Jersey Mike’s in Los Angeles, has had to increase menu prices significantly. A turkey sub that used to cost under $10 is now priced at $11.15.

A photograph of a Burger King counter with the menu in the background

Source: Wikimedia

Chacon has also reduced morning and evening staffing, cutting part-time employees from 165 to about 145 to manage costs.

Job Growth Amidst Challenges

Despite the concerns, the industry has seen job growth. According to the U.S. Bureau of Labor Statistics, 8,000 new jobs were added in the first two months after the wage increase.

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Joseph Bryant of the Service Employees International Union noted that higher wages are attracting better job candidates, reducing turnover.

Corporate Strategies and Automation

Aaron Allen, founder and CEO of a global restaurant consulting firm, predicts a divide between large corporations and smaller chains.

A photograph taken of the exterior of a Burger King restaurant

Source: Wikimedia

Companies like McDonald’s can invest in automation and menu reconfiguration to reduce costs, whereas smaller chains may struggle to survive or face major store reductions.

Personal Sacrifices and Price Increases

Cheng has no plans to lay off any of his 250 employees but has cut overtime and reduced the number of workers per shift.

An image of one of the oldest McDonald’s restaurants in the US

Source: Wikimedia

Despite an 8% menu price increase in January, Cheng reported being $20,000 over budget for a two-week pay period. Rising rents and food costs further strain his business.


Employee Perspectives

Julieta Garcia, who works at a Pizza Hut in Los Angeles, now enjoys more time with her son due to reduced workdays. The extra income has helped her manage bills and healthcare expenses for her child.

Cooking of Tacos on a Large Pan

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Similarly, Howard Lewis, a retiree at Wendy’s in Sacramento, has been able to invest his increased earnings.


Governor Newsom’s Justification

Governor Gavin Newsom defended the wage hike, emphasizing the need to provide a living wage for fast food workers.

A photograph of a McDonald's sign outside a restaurant/ A photograph of California’s governor, Gavin Newsom

Source: Justin Sullivan/Getty Images/Getty Images

“We are a state that gives a damn about fast food workers — who are predominantly women — working two and a half jobs to get by,” he stated in his address.


Mixed Outcomes for Managers

For Enif Somilleda, a general manager at Del Taco in Orange County, the wage increase has been a double-edged sword. While it has improved her financial situation, she now manages more work with fewer employees per shift.

General views of In-N-Out Burger on Sunset Blvd after a rainstorm on February 23, 2023 in Hollywood, California with Gavin Newsom

Source: AaronP/Bauer-Griffin/GC Images; Daniel Nesbitt/Wikimedia Commons

“Financially it has helped me,” she said, “but I have less people, so I have to do a lot more work.”


Future Predictions

Experts are cautiously optimistic about the long-term impact of the wage increase. Past wage hikes in California and New York saw continued job growth despite initial fears.

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A University of California, Berkeley study supports this, suggesting that higher wages do not necessarily lead to job losses.


Community Impact

The wage hike has had a ripple effect in the community. Families of fast food workers are experiencing financial relief, enabling them to invest in their future and manage everyday expenses better.

An image of a newly decorated McDonalds restaurant

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However, the increased costs are also passed on to customers, affecting their dining choices.


A Complex Balance

California’s fast food industry is navigating a complex balance between fair wages and sustainable business operations. While the wage increase aims to uplift workers, it poses significant challenges for operators.

California Gov. Gavin Newsom overlaid on McDonald's drive thru sign

Source: Noam Galai/Getty Images for Clinton Global Initiative; RDNE Stock project/Pexels

The coming months will reveal more about the long-term effects and how businesses adapt to this new economic reality.