By 2024, the minimum wage in California is expected to rise to $15 per hour, but some fast food restaurants are already feeling the pinch and laying off employees. A recent research from the conservative think tank Employment Policies Institute claims that since the minimum wage increase was first announced in 2015, some of the state’s biggest fast-food restaurants have laid off employees on average by 7%.
The Impact of Higher Labor Costs
According to the report, fast food companies have been compelled to cut staff, close certain sites, and increase their investments in automation and self-service technology as a result of rising labor expenses. For instance, Jack in the Box has experimented with robotic arms and voice assistants, while McDonald’s has installed kiosks and mobile ordering in several of its locations. The research also includes a survey of 200 fast-food franchises, who stated that in reaction to the hike in the minimum wage, they intend to reduce hours, raise prices, and lay off employees.
According to the analysis, the increase in the minimum wage is having the opposite effect of what is intended to benefit workers, particularly young and unskilled people who depend on fast food jobs as a stepping stone to better prospects. According to the analysis, there is a 1.5% loss in employment for individuals aged 20 to 24 and a 2% decline for those aged 16 to 19 for every 10% increase in the minimum wage.
The Counterarguments from Advocates and Experts
But not everyone concurs with the methodology and conclusions of the report. Raising the minimum wage will benefit workers and the economy, although several advocates and academics have questioned the report’s data sources, assumptions, and conclusions.
For example, the report’s assertion that fast food restaurants had shuttered sites as a result of the raise in the minimum wage has been refuted by the California Restaurant Association, which speaks for the interests of the sector. The group argued that the closures were mostly caused by other factors, such as market saturation, competition, and consumer preferences, and that the research used incomplete and outdated data.
Furthermore, a number of economists and experts contend that the analysis in the report is faulty and biased, and that there has been little to no detrimental effect of the hike in the minimum wage on employment and business success. They have referenced other research showing that pay increases improve worker productivity, lower employee attrition, raise consumer spending, and promote economic expansion. They have also pointed out that the minimum wage rise has not only damaged the fast food business but has not had a major negative impact on employment losses or closures in other industries including retail, healthcare, and education.
Conclusion
In conclusion, there is still disagreement among the stakeholders regarding the impact of the minimum wage rise on the fast food industry. While some fast food restaurants have announced job losses and store closures, others have made innovative and technological investments in response to rising labor costs.
Some research indicates that the increase in the minimum wage has negatively impacted employment and business performance, but other studies indicate that it has positively impacted worker welfare and economic activity. The final result of raising the minimum wage could be influenced by a number of variables, including the fast food chains’ size, positioning, and business plans; the traits and inclinations of their employees and customers; and the general health of the economy.