Starting April 1st, 2024 individuals working at a California fast food restaurant with at least sixty locations nationwide will be paid $20 per hour. If you own a fast-food franchise in California, your labor costs will increase by about $3.40 per hour. That is a lot. In return, according to the Associated Press, labor unions have dropped their attempts to hold fast-food corporations liable for the misdeeds of their franchise operators in California.
Why does it matter to me?
If you are in California and run a restaurant – your labor costs will go up because you are now competing against a $ 20-per-hour minimum. Your dishwashers, your bussers, your chefs, and even your wait staff may be tempted to work in Fast Food Franchise. Additionally, if you are an employer in California, labor may now be more expensive because people can work in a low-qualification job and get $20 per hour.
What if I am an employer outside of California? Why does this matter to me?
It may not be unless you employ people in a border state. Then, you may have additional labor costs.
Even if none of this is true, you can expect labor costs to continue to rise for the foreseeable future. With continued low unemployment, Labor Unions have more power across the country, and with the National Labor Board making it easier for Unions to be voted in, the expectation is that labor cost per unit (per person) will continue to rise. In my home city of Nashville, TN, labor costs at fast-food restaurants are already between $10 and $12, way above the minimum wage of $7.25.
What should you do?
- Build up your employee experience and retention programs so employees don’t want to look elsewhere for jobs.
- Review your employee’s compensation with the market, starting with your low-wage earners. It may be the right time to give them a raise.
- Refocus on your priorities, evaluate your employee base, and remove excess personnel.
- Plan for the future. Labor costs will continue to rise; build this into your budget beyond the normal pay increase.
The benefit of a higher minimum wage for organizations is that employee tenure is higher, reducing turnover costs and allowing employers to keep institutional knowledge for longer.
Let me know what you are doing to handle the higher cost of labor in California or elsewhere.