‘Winners and Losers’ as $20 Fast-Food Wage Nears in California

A decade ago, Jamie Bynum poured his life savings into a barbecue restaurant now tucked between a Thai eatery and a nutrition store in a Southern California strip mall.

As a franchise owner of a Dickey’s Barbecue Pit, Mr. Bynum is pridefully particular about the details of his establishment — the size of the hickory wood pile on display near the entrance, the positioning of paper towel rolls on each table, the careful calibration it takes to keep his restaurant staffed 10 hours a day with a small crew.

The staffing, he said, has become harder in recent years, as the state’s minimum wage has steadily increased since 2017, often rising by a dollar per year. Today, it’s $16 an hour.

But on Monday, it will jump to $20 an hour for most fast-food workers in California, propelling them to the top of what minimum-wage earners make anywhere in the country. (Only Tukwila, Wash., a small city outside Seattle, sets the bar higher, with a minimum wage of $20.29 for many employees.)

The ambitious law, which supporters hope to see replicated nationwide, has been characterized by opposing sides in stark terms. To backers, it is a step toward fair compensation for low-wage workers who faced significant risk during the pandemic. To opponents, it is a cataclysmic move that will raise food prices, lead to job losses and force some franchisees to consider closing.

“People don’t understand that when wages rise, so do the prices,” Mr. Bynum said.

Mr. Bynum has, in recent years, raised prices to try to maintain profit margins — and each time, he said, he has noticed a drop in customers. That, in turn, forced painful decisions about cutting staffing and trimming hours.

The new minimum wage will add $3,000 to $4,000 to his monthly expenses, he said, and while he hopes to keep all eight of his employees, he doesn’t know if he can make the numbers add up.

One employee, Josue Reyes, has worked at the restaurant on and off over the past decade.

He works the evening shift, often taking the bus and then riding his hybrid bike the rest of the way to the restaurant. Mr. Reyes, 35, said the consistent pay raises through the years — he now makes $16 an hour — had helped him significantly. He puts much of his paycheck toward assisting his mother pay the rent at their trailer park and tries to save where he can.

While another pay increase will help him, Mr. Reyes, who has worked in fast food for much of his life, said he feared that before long, jobs would become more competitive and harder to keep.

“There can be job losses because restaurants close,” he said on a recent weekday, dressed in jeans and a T-shirt for his shift. “No one wants that, but it seems very possible.”

The potential ripple effects of the law weighed by Mr. Bynum and Mr. Reyes at this fast-food restaurant in Lancaster, a high desert city at the northern edge of Los Angeles County, mirror conversations that will play out across the state as owners and employees — and eventually consumers — adjust to the new reality.

Championed by powerful labor organizations, including the Service Employees International Union, the law will lift pay for more than half a million California employees who work for fast-food chains with 60 or more locations nationwide. It also creates a council comprising, among others, workers, franchise owners and union representatives who will oversee future increases to the minimum wage and devise workplace standards.

In an interview, Mary Kay Henry, president of the S.E.I.U., said the law was long overdue. “We are talking about a billion-dollar industry that can and should afford this raise,” she said, noting that most workers are Black and Latino. “Raising pay improves employers’ ability to hire and retain workers.”

The potential beneficiaries include Anna Velazquez-Cruz, who has worked at a Papa Johns in the East Hollywood neighborhood of Los Angeles for a year.

Ms. Velazquez-Cruz, 19, lives with relatives in an apartment a short walk from the shop, where she makes around $18 an hour. “The internet bills, the rent, it gets higher,” she said on a recent evening.

But Matt Haller, president of the International Franchise Association, said he expected the new law to significantly harm many small businesses.

“Local restaurants will face hundreds of thousands of dollars in increased operating costs,” Mr. Haller said. “Customers will face higher food prices, and restaurant owners will have to cut costs to keep their doors open.”

Economists are divided over the merits and pitfalls.

Ismael Cid-Martinez, an economist at the Economic Policy Institute, a think tank partly funded by labor unions, said the law would help lift wages for workers in other low-paying industries in the state.

“These workers are also consumers,” he said. “Any increase in earnings for them means additional resources that they use to feed their families, bolster small businesses and strengthen their state economy.”

David Neumark, a professor of economics at the University of California, Irvine, said the impact would be more nuanced. “A higher minimum wage creates winners and losers,” he said.

The winners will be workers who keep their jobs and at most have a modest reduction in hours, he said, while the losers will be those whose hours are substantially cut or who lose their jobs — along with smaller franchise owners who were already struggling to make much of a profit.

“They make more than minimum-wage workers,” he said. “But lots of them are not high-income.”

That is the case for Mr. Bynum, whose path to franchise ownership started with a career change 10 years ago.

He and his wife, Liza, who both then worked in the information technology sector, noticed a dearth of barbecue restaurants near their home in Lancaster and used all of their $150,000 in savings to open a Dickey’s Barbecue Pit.

The chain, based in Dallas, operates more than 400 restaurants, and Mr. Bynum said he pays 9 percent in royalties to the headquarters. He has cut his staff by half over the past decade and trimmed hours. He has raised prices: A loaded baked potato cost $8 when he opened; now it’s almost $20 when ordering at the restaurant.

That’s a significant increase for his customers in Lancaster, a city 70 miles north of downtown Los Angeles where about 15 percent of residents live at or below the poverty line — and where higher pay and higher costs will both be keenly felt.

Most days in recent years, Mr. Bynum and his wife have run the restaurant with help from their two adult children.

“What started as a dream has slowly faded,” Mr. Bynum said.

Joe Marques is another owner wondering how to navigate the months ahead.

He became the owner of a Wienerschnitzel restaurant in San Jose, Calif., in the early 1990s and now has two other locations in the area. He employs around 45 people at the three stores combined. As an owner, he said, he is surviving week to week and has little money for capital improvements, such as repaving parking lots and painting.

“There is a lot of perception that we are a big corporation simply because of the name,” he said. “In reality, I am essentially an independent small-business owner.”

At current staffing levels — 60 percent of his employees work full time, the others part time — it will cost him an additional $4,500 to $5,000 a month per store to remain open, he said. Mr. Marques, 64, had wanted to permanently hand his businesses over to his son. That hope, he said, seems more and more fleeting these days.

“It’s not like we are getting rich on this,” he said. “We are trying to make a living.”

For Mr. Reyes, the longtime Dickey’s employee, his job has given a sense of stability that he worries may soon shatter.

He likes that the job is close to home, Mr. Reyes said, so someone in his family can pick him up and he can avoid taking a late-night bus. While welcoming the higher pay that the law will mandate, he expressed sympathy about the financial strain on Mr. Bynum.

“There has been a type of companionship,” he said. “He’s given me consistent work.”

What Mr. Bynum sees on the horizon concerns him. For months, he and his wife have thought about what they might do next — perhaps, he said, go back to I.T. — but he fears his options would be limited. At 51, he’s not sure who would hire him. He worries, too, about what would happen to Mr. Reyes and his other employees.

“We’re all in this as a team,” he said. “I care about my people and have given people a lot of opportunities over the years.”

And singling out the fast-food industry for a higher minimum wage, Mr. Bynum said, “all just seems targeted and like an attack.”

“I am a small-business owner at the end of the day,” he added, “just scraping along.”

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