Some fast food chains hiked their prices overnight to compensate for an increase in the minimum wage for some California fast food workers that went into effect Monday.
Several CEOs have said they need to raise menu prices or lay off workers to offset increased costs from the new $20 minimum wage. But labor and policy experts say the markups aren’t actually necessary.
“The fast food industry in California can largely absorb these operating costs associated with a minimum wage increase without actually having to hike prices up any more than they actually have over the past decade,” Ali Bustamante with the Roosevelt Institute said at a press conference organized by SEIU, the union that represents California’s fast food workers.
Bustamante said corporations are seeing record profits and wide margins, allowing them “to be able to absorb higher operating costs without actually necessitating increase in prices or impacting labor in any negative way.”
Michael Reich, professor of economics at UC Berkeley, said the hit to employers from the increased minimum wage is not as bad as many think.
“If the minimum wage goes up by 25% from $16 to $20, the average wage, the average cost for an employer, only goes up by one-fifth of that, which is 5%,” he said.
He said many workers were already getting paid above $16, which has lessened the impact of the wage hike.
“If any of those fast food restaurants fire anybody in Emeryville or West Hollywood where we’re already well over $20 an hour, they’re lying,” added Tia Koonse, legal and policy research manager at the UCLA Labor Center. “That is not a result of increased labor costs, because that is exactly what they already pay.”
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Bustamante said employers should look at the minimum wage increase as an opportunity to reinvest profits into their workers “in a way that is going to be beneficial not just for the overall economy, but certainly for these businesses in the long term.”
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