Have there been massive layoffs and store closings due to the new regulation? The short answer is no, but the truth is that we can’t know yet because the new rate only became effective on April 1st. The news machine has had scattered stories of a disaster for the industry over the last few months. Are the numbers there to support that view?
What do we know is happening?
Contrary to the hype, Limited-service restaurants have not cut jobs. Overall employment has been up in the months since the minimum wage increase was passed, in the same period when they were supposedly getting prepared for the increase.
According to data from the U.S. Bureau of Labor Statistics, limited-service restaurants have actually increased job count over the past year. They employed 741,000 workers in California in April, according to a preliminary estimate, up from 734,400. These are not seasonally adjusted numbers, and restaurants do hire more during the summer months. 1.
Jobs are up for the industry, however, in California job growth has slowed. That slowdown in growth looks to be due to an industry-wide slowdown, not something particular to California.
How Does California Compare?
Technomic, the data and analytics firm had predicted a 5.3% increase nationally in sales for this year but has revised that number to 3.8%. Blame slower traffic and higher prices. Technomic now believes that restaurants will barely keep up with the expected rate of inflation this year. 2.
Some chains, like Wingstop, Chipotle and Sweetgreen, are attracting more customers. But most are losing them, a decline that began midway through 2023 and appears to have worsened so far in 2024. 2.
Customers seem to be “trading out” and picking up food from grocery and convenience stores instead of buying fast food. According to a Lending Tree survey, almost 80% of Americans think of fast food as a luxury. 2.
If the wider industry is able to achieve that 3.8% growth, it will compare closely to growth rates in the three years before the pandemic.
So Will The New $20 Minimum Wage Make a Difference In CA?
It’s safe to say that it will make a difference, but how much of a difference is hard to tell at this point. The challenge for fast food is that there are limits to creating more efficiencies in operations.
Everyone is excited by AI but the technology is nascent and so far, it hasn’t impacted the industry much. It is being used by a few chains to take orders, but it’s not quite reliable enough to replace a bunch of employees.
We’ve written previously about automated systems and robotic machines for kitchens, but they haven’t been adopted widely and the practical value of them has yet to be determined.
Technology is not coming to the rescue, either. Kiosks—despite popular belief—are not big replacements for staff, and if anything, they create more work because the restaurant gets larger orders when they add them. At McDonald’s, which has years of kiosk experience, the devices require more workers. 1.
Recent Comments