Fast Food Chains in California Raise Prices after Minimum Wage Increase
As California fast food workers prepare to receive a significant boost in their wages, with the state increasing the minimum pay to $20 per hour, both McDonald’s and Chipotle have publicly announced their intentions to raise menu prices to offset these rising labor costs.
Earlier this month, California Governor Gavin Newsom signed a law that increases the state’s minimum wage for fast food workers to $20 an hour. This new legislation also establishes a Fast Food Council with the authority to further increase wages over the next six years. The move is part of a broader labor movement to establish a “living wage” for individuals in lower-level positions, such as those in the fast-food industry.
But now, at least two fast food chains, McDonald’s and Chipotle, have publicly stated that they will be raising the prices of the items on their menu to combat this growing cost of labor.
In a recent conference call, Chipotle’s Chief Financial Officer, Jack Hartung, stated that the company anticipates menu prices to increase by a “mid-to-high single-digit” percentage. However, the final decision on the precise percentage is still pending. Chipotle has already implemented four price increases since the summer of 2021.
McDonald’s, likewise, has confirmed its plans to raise prices to counterbalance the higher labor expenses. The exact amount of this price adjustment has yet to be determined.
“There will certainly be a hit in the short term to franchisee cash flow in California,” explained McDonald’s CEO Chris Kempczinski.
Although fast food companies have responded to the minimum wage hike by raising prices, many labor groups still believe that the $20 an hour minimum wage is not enough for fast food employees. In the past, Calmatters.org has argued a fast-food employee wage of $20 an hour is still not the “living wage” labor groups hope to achieve.
“In general, $20 an hour is not considered a living wage in California,” said CalMatters.org. “For a working couple with one child, that would be $23.81 an hour and for a single adult with no children, it would be $21.24, according to the Massachusetts Institute of Technology’s living wage calculator.”
