California’s fast-food industry wasn’t crying wolf when it warned of significant fallout from the new $20 minimum wage for most quick-service workers in the state, according to new research from a group that opposed the pay hike.
The study, based on a survey of 182 fast-food operators, found two-thirds (67%) of affected employers project higher wages will cost them at least $100,000 during the first year. About one in four of those respondents pegged the impact at an additional $200,000 in annual labor costs in the second year.
Virtually all (98%) said they had already raised prices, and nearly the same percentage (93%) indicated they anticipate another increase during the pay boost's second year.
Similarly, according to the survey, a large proportion of affected employers (70%) have eliminated positions and cut staff hours (89%). Nearly the same percentages anticipate further belt-tightening next year, with 74% saying they’ll cut jobs and 87% voicing their intention to stop employees from picking up additional shifts.
The numbers are the bleakest yet to be aired in the wake of the new minimum wage that took effect April 1. The new minimum applies to the employees of most fast-food restaurants in the state with at least 59 sister units nationwide.
But the statistics are contradicted by other findings, including data from the federal government. Figures from the U.S. Bureau of Labor Statistics show that fast-food restaurants in the Golden State had more people on their payrolls in April, after the minimum wage had increased, than they did a year earlier.
Job growth had slowed, according to the bureau, and some industry representatives note the BLS figures were not seasonally adjusted and hence somewhat distorted.
The new research was conducted on behalf of the Employment Policies Institute, a non-profit group run by the employer-supported Washington, D.C., government-affairs firm Berman and Associates. The company is known for its in-your-face lobbying style.
“Even before the $20 wage went into effect, fast-food restaurants made it clear they would not be able to survive,” Rebekah Paxton, research director of the Employment Policies Institute, said in a statement. “Now after just a few months, the policy has been a disaster, killing jobs and shuttering restaurants.”
The data released by the group did not indicate how many fast-food restaurants had closed or opened since the higher minimum wage took effect. But 74% of respondents said the chances of being forced to shut their restaurant has increased since April 1.
In addition, 89% of respondents said they are less likely to open another restaurant in California, while 59% said they would focus their expansion on areas outside of the state.
The data also did not reflect how respondents’ top lines had changed. Yet they weren’t optimistic. About 92% said they expect traffic to decrease; roughly half of those termed the anticipated drop-off “significant.”
California Gov. Gavin Newsom has estimated that the new minimum applies to about 580,000 workers in the state. On July 31, a quasi-government body called the Fast Food Council will meet to discuss whether the pay floor should be adjusted again on Jan. 1.
The law that created the Council and set the $20 wage permits the wage panel to raise the minimum wage by as much as 3.5% per year.
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