California Restaurants Cut Jobs as Fast-Food Wages Set to Rise

Chains lay off workers, shave hours ahead of state minimum-wage increase

By Heather Haddon of The WSJ. Excerpts:

"A California state law is set to raise fast-food workers’ wages in April to $20 an hour. Some restaurants there are already laying off staff and reducing hours for workers as they try to cut costs.

California restaurants, particularly pizza joints, have outlined plans to cut hundreds of jobs in the months leading up to the April 1 wage mandate, according to state records. Other operators said they have halted hiring or are scaling back workers’ hours."

"Some pizza-chain operators in California are laying off drivers ahead of the wage law’s start and farming out delivery service to apps. Franchisees for Pizza Hut and Round Table Pizza, a chain of around 400 units founded in Menlo Park, Calif., have said they plan to lay off around 1,280 delivery drivers this year, according to records that major employers must submit to the state before large layoffs."

"The coming minimum-wage increase for California fast-food workers at bigger chains represents a 25% increase from the state’s broader $16 minimum wage. McDonald’s, Chipotle Mexican Grill, Jack in the Box and other restaurant chains have said they would raise menu prices in California to offset some of the cost.

Many California restaurant operators are looking for other ways to cover the cost, like reducing hours, closing during slower parts of the day or serving menu items that take less time to make."

"Other restaurateurs, including Hom of Vitality Bowls, said they are turning down opportunities to open new locations in California and looking at expanding in other states instead. 

California had 726,600 people working in fast-food and other limited-service eateries in January, down 1.3% from last September, when the state backed a deal for the increased wages. Total private employment in the state declined 0.2% over that period, according to state figures." 

"A study by the nonpartisan Congressional Budget Office last December found that raising the federal minimum wage to $17 an hour from $7.25 by July 2029 could increase wages for more than 18 million people, but also could reduce employment by about 700,000 workers. 

Higher wages would increase employers’ costs, raise prices for consumers and depress some demand, the CBO found. Some employers would also turn to technology to try to reduce their reliance on low-wage workers."

"California-based El Pollo Loco told investors this month it was automating some of its salsa-making"