A minimum wage increase for fast-food workers in California concerns McDonald’s about a “devastating financial blow.” Here’s the whole story.
“Devastating Financial Blow”
In California, fast-food restaurants with at least 60 locations nationwide must pay their workers a minimum of $20 per hour under a recently passed law. Labor groups wanted even higher wages, but it settled at $20.
McDonald’s says the new law will cause a “devastating financial blow,” costing each location an additional $250,000 annually.
One person on the social media platform X said that currently, there are “just shy of 1500” McDonald’s in California, which adds up to approximately “$375 million per year” in additional wage expenses.
This person wondered if McDonald’s was “about to say bye-bye” to California.
The National Owners Association, an advocacy group representing McDonald’s, said, “These costs simply cannot be absorbed by the current business model.”
McDonald’s sent a letter to each of their restaurants telling them they “worked tirelessly…to fight these policies and protect Owner/Operators’ ability to make decisions for their business locally.”
Increased Political Engagement
In response to the defeat, McDonald’s said they have “significantly increased [their] political engagement in the state.” They said this included a new team of “lobbyists and campaign consultants” to help protect their restaurants and workers.
McDonald’s franchisees are upset because they say the law was passed “without the input of the operators who actually employ the workers.” Currently, the minimum wage is $15.50, which means fast-food workers will see a 29% increase in pay.
John Motta, chairman of the Coalition of Franchisee Associations, said that McDonald’s franchisees “were intentionally excluded from the negotiations and yet are left to bear the financial burdens of their result.”
California Governor Gavin Newsom signed off on the legislation and said it “gives hard-working fast-food workers a stronger voice and seat at the table to set fair wages…across the industry.”
Newsom wants the men and women who “have helped build [California’s] world-class economy” to “share in the state’s prosperity.”
They Can Afford to Pay a Minimum Wage
In September 2022, Governor Newsom signed the Fast Food and Accountability and Standards Recovery Act, which created a “Fast Food Council” to protect workers.
The minimum wage increase for fast-food workers has been in the works since that legislation passed.
Supporters of the new law voiced their opinions on X. One person said, “If the average revenue annually for McDonald’s alone is $2.9 million, surely they can afford to pay their workers a minimum wage of $20 an hour.”
Machines Replacing Workers
The same person also said, “Maybe those executives can’t buy their third house, so what?”
The minimum wage increase also brought up the use of kiosks to cut costs. One person said that “machines are already replacing workers” in many industries.
International Franchise Association CEO Matt Haller said the bill “creates the best possible outcome for workers and local restaurant owners…while protecting the franchise business model in California.”
An Ill-Considered Bill
McDonald’s U.S. President Joe Erlinger posted a statement on the company’s website calling the bill “lopsided” and “ill-considered.” Erlinger criticized lawmakers for not targeting all restaurants.
Fast-food workers in California will see the pay increase hit their paychecks in early 2024.
One person who works at a restaurant consulting firm said that the new minimum wage increase would “make the restaurant industry a lot more competitive for employees,” and other industries would need to “step up.”
Featured Image Credit: Shutterstock / SUDONG KIM