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California's fast food minimum wage could affect other states

Posted at 10:46 AM, Sep 28, 2022

Fast food chain workers in California could soon be making triple the federal minimum wage, which has received both praise and criticism.

California passed AB 257, also known as the FAST Recovery Act.

It could raise the state minimum wage to $22 an hour in California, but it's more wide-reaching than people realize.

"This is expected to be passed into law in 2023 which could potentially have a significant impact in the entire restaurant industry,” said Riley Lagasen with the Global Restaurant Industry Practice Group.

"The problem is when you increase the wages, the people that are hiring workers shy away from hiring more,” said Kishore Kulkarni, an economics professor at MSU Denver. "Increasing the wage also creates a higher cost of production."

The bill was signed into law by the California governor on Labor Day and designed to give fast food employees a seat at the table.

There will eventually be a 10-person council to set the standard of wages, working hours and conditions for employees of chains with 100 or more locations nationally.

But it's received pushback from the restaurant industry, with large chains like Chipotle, Chick-Fila- A and In-N-Out sponsoring efforts to block the bill.

"Those behind the referendum have to collect 600,000 signatures in California in order to put it on the ballot which would be in 2024,” Lagasen said. “Which the voters of California would have the ability to say whether this act passes or not."

However, this affects more than just California. Experts say it can have a ripple effect throughout the country, possibly opening the door for other states to do the same.

"We saw the early signs of it with the fight for $15 movement,” Lagasen said. “I think that's an appropriate analogy, when the fight for $15 movement gained traction, we saw a number of city and states raise minimum wage dramatically. Washington, Oregon New York and other locations in responded to that."

The other way this affects the country is that the increase will inevitably fall on the consumers.

With experts expecting a 2-3% increase on purchases.

"If this is implemented, by necessity businesses are going to have to raise prices,” Kulkarni said. “Or do things to keep cost down, whether it's replacing people with technology."

As of right now, the industry has until December first to get enough signatures to put the law on hold until a statewide referendum in 2024.