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How fast food wage hike affects other sectors of LA's economy

For fast food workers across California, April 1 was a good day to clock in.

California’s new law has gone into effect to raise the minimum wage of fast food workers, who are employed by chains of 60 restaurants and more, from $16 to $20 an hour.

“I’m eager for the first big paycheck,” Lizette Aguilar, who has worked for McDonald’s for 14 years, said in Spanish.

But for franchise owners, the dramatic surge in labor costs, including payroll taxes and workers compensation insurance, is a nightmare.

“My average store will go up $180,000 a year,” explained Michaela Mendelshon, who owns six El Pollo Loco franchises in LA and Ventura Counties. “As of today, I am well into the red. We are losing money, so we are going to need to stop the boat from leaking by making changes.”

As with other franchise owners across the state, Mendelshon said menu item prices will need to go up.

The business owner hoped automated kiosks that she brought in last week would provide some relief.

“I think AI will take root next year in the drive-thru,” Mendelshon said. “You won’t know if you are talking to a robot or a person.”

Another problem is that it’s creating confusion as to which restaurants are covered under the new law, especially when it comes to smaller franchises.

Gabriella Campbell, who owns a Handel’s Ice Cream franchise in LA, asked the author of the bill, Assemblyman Chris Holden of Pasadena, if her store was included in the mandatory minimum wage hike.

In response, Campbell said the assemblymember told her to talk to the group that wrote the law, the Service Employees’ International Union(SEIU.)

“Upon further contact with the SEIU, they also decided their scope was very limited and most likely not be able to carve out an exemption for us,” Campbell said. “So that we will probably need to write our own bill.”

While the law targets fast food workers, it will impact wages in all sectors of the economy in need of low-skilled help.

“Because the labor market is competitive, companies are having difficulty finding employees. If fast food companies are paying $20 an hour, other restaurants will have to at least match that to retain employees,” economist Alan Gin explained. “And then people outside the restaurant industry will have to up their wages.”

In response to NBC Los Angeles’ interview request, Assmlymeber Holden said although he was the author of the minimum wage increase bill, he was not part of the negotiations on which businesses would receive an exemption.

KCRA, a NBC affiliate in Sacramento, reported all groups involved in the final negotiations of the law signed non-disclosure agreements, keeping details legally confidential. 

Source: NBC Los Angeles

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