An executive from a major fast food brand has spoken out against California’s recent minimum wage increase, slamming the decision and promising price hikes for food as a result.
California Raises Minimum Wage for Some Workers
For some fast food employees in the state of California, their paychecks are about to get a nice big bump.
Starting in April, the minimum wage will increase to $20 hourly. This increase applies to fast food workers whose restaurants have at least 60 locations across the country.
Wages Increasing by $4.50 Per Hour
As of today, those same workers make a minimum wage of $15.50 per hour. The impending increase will make a significant difference for thousands of employees.
Income Increase is Significant
For full time workers who currently make minimum wage and are set to be bumped to $20 per hour this spring, their annual income will increase by around $9,300.
Executive Weighs In
While employees celebrate the news, others in the business are not as pleased.
Andrew Wiederhorn, former CEO and current chairman of FAT Brands, says the wage increases will have a negative effect on businesses and by extension, their customers.
“Someone’s Got to Pay for It”
“Someone’s got to pay for it and the restaurant operators don’t have the margin for that,” Wiederhorn told Fox Business. “So, prices are going to go up.”
Restaurant Prices Will Increase, Wiederhorn Says
The restaurant mogul said that restaurant owners will have no choice but to increase their prices to make up for the higher labor costs.
Critics Worry About Unemployment
Some opponents of minimum wage bumps have long suggested that unemployment rates will rise as a result of businesses having to make cuts to afford to pay their employees.
Recent Hike Does Not Achieve Livable Wage
But given the effect of inflation and the fact that the federal minimum wage has not been updated in fifteen years, change on some level was overdue.
Even a hike to $20 per hour is not enough to meet what MIT considers a living wage in California.
The True Cost of Living
For a single adult with no children in California, the hourly rate that researchers determined would be necessary to live comfortably is $27.32.
They took into account factors like inflation, cost of living, child care, and healthcare costs.
Raising Children Cost-Prohibitive for Many
Even adding just one child makes a massive impact – MIT estimates that a single adult with one child would need to make $47.96 per hour in California to be considered financially secure.
Wiederhorn Says Money Has To Come From Somewhere
Wiederhorn cautioned consumers to prepare for the price of fast food to go up because restaurants simply won’t be able to keep up with higher labor costs.
But reports show that there is plenty of profit – it’s just not being distributed to low level employees.
Restaurant Execs Make Millions
In 2022, while in position as the CEO of FAT Brands, Wiederhorn received a total of over $3.5 million in compensation – a 24% jump from the previous year.
Most of that was bonus income. Other executives from FAT Brands received similar compensation packages.
Voters Should Blame Themselves for Higher Costs, Says Millionaire
Meanwhile, Wiederhorn says that when fast food costs go up, voters who supported the minimum wage increase will have no one to blame but themselves.
“Voters Must Have Known What They Were Getting Into”
“The consumers who are voters must have known what they were getting into by promoting this legislation to raise the minimum wage from $15 to $20 and on its way to $25,” Wiederhorn said.
Wiederhorn Promotes Shrinkflation
The executive also gave examples of how restaurant owners can recoup costs. His advice to “promote value” was that owners should essentially sell less food for the same or higher prices.
“Control Your Portion Size”
“There are things you can do as an operator to promote value,” he said. “You know, just as an example, you could do an all-cheese pizza instead of a pepperoni pizza or barbecue chicken pizza, things like that. You can control your portion size.”
Exploring Shrinkflation
Wiederhorn’s advice is an example of shrinkflation, which occurs when businesses cut costs by offering less product but maintaining prices.
For example, Frito-Lay engaged in the practice by reducing some bags of Dorito’s from 9.75 ounces to 9.25 ounces, but selling them at the same price.
“We took just a little bit out of the bag so we can give you the same price and you can keep enjoying your chips,” Frito-Lay explained.
Biden Condemns Shrinkflation
Critics of shrinkflation include President Biden, who recently said the practice needs to stop and called it a “rip-off.”
“Some companies are trying to pull a fast one by shrinking the products little by little and hoping you won’t notice,” Biden said. “The American public is tired of being played for suckers.”
Minimum Wage Hike a Net Positive For Many Workers
While restaurants in California will likely resort to shrinkflation or just overt price increases, the minimum wage hike for fast food workers will make a major difference in the lives of the people who are most impacted by inflation.
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The post California Fast Food Workers to Earn $20 Per Hour; Exec Warns of Food Price Hikes first appeared on From Frugal to Free.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
