Buyers beware: The trickle-up effect of higher minimum wages

Buyers beware: The trickle-up effect of higher minimum wages

Buyers beware: The trickle-up effect of higher minimum wages

A resident of California warns that a new minimum-wage law for some fast-food restaurants in his state will do more harm than good.

At the beginning of 2024, the minimum wage in California moved up to $16 an hour. However, a new law that took effect this week (Monday, April 1) requires certain fast-food restaurants to pay at least $20 an hour. This is for restaurants that are part of a chain of at least 60 establishments nationwide.

Steven Greenhut, Western Region director for the R Street Institute, says this won't sit well with managers. "A shift manager [or] an assistant manager is going to want to get more than the wage of just the shift worker," he predicts. "So, it's going to drive wages all the way up the chain."

Meanwhile, Greenhunt says fast-food restaurants that are not required to pay $20 an hour will have to increase pay to get and keep workers. "And I think we're going to see an acceleration towards mechanized kiosks," he offers.

Regardless, Greenhut expects restaurants will try passing on expenses to customers through higher-priced items – but that's assuming customers will want to fork over more money.

Greenhut, Steven (R Street Institute) Greenhut

"A lot of us will just pull back on the number of times we eat at these restaurants," he tells AFN. "There's probably going to be a reduction in business, I would think."

Even if customers do continue to frequent certain establishments, there is confusion as to which establishments with at least 60 locations nationwide are expected to comply.

News reports vary on whether restaurants such as Panera are exempt. Some articles and blogs say Panera will pay $20 an hour. However, the state of California's Department of Industrial Relations published a lengthy list of Frequently Asked Questions (FAQ) that does include the following information:

"Restaurants that operate a bakery that 'produces' and sells 'bread' as a stand-alone menu item as of September 15, 2023, and continue to do so are exempt from the new law."

Greenhut says it did not have to come to this situation. "Fast-food jobs – there's nothing wrong with them. [But] for most people, it's not meant to be a career," he argues.