[US] Some restaurant workers could see significant wage growth in 2023

More than half of US states will increase their minimum wage in 2023 but some restaurant workers could see even more significant gains this year, CNBC reports.

On January 1, California’s state minimum wage rose to $15.50 an hour, however, depending on the results of an ongoing court battle, fast-food workers in the state could find themselves earning as much as $22 an hour this year. And industry lobbyists say similar legislation could pass in states such as New York and Michigan.

Bars and restaurants have turned to higher wages as their primary solution to attract enough workers to meet demand after the pandemic turned an existing labour crunch into a full-blown crisis.

The labour shortage has reportedly eased over recent months but it has not completely disappeared. Employment at eating and drinking establishments was down 3.9 per cent in November compared with February 2020 (when adjusted for seasonality), according to the Bureau of Labor Statistics.

Average hourly wages for the industry have climbed 21 per cent in the same period, hitting a projected $18.99 in November. Labour costs are hard to reduce because restaurants need sufficient workers to keep up with orders but the other costs to keeping a restaurant open, such as ingredients and electricity, have also grown more expensive, further eating into operators’ profits.

If California’s government gets its way, average hourly pay for restaurant workers could reportedly soar this year. In 2022, Governor Gavin Newsom signed a bill into law that creates a 10-person council to govern the wages and working conditions for workers of restaurant chains with more than 100 locations nationwide.

The restaurant industry opposed the law - the FAST Act - and gained more than 1 million signatures from California residents to hold a referendum in 2024 aimed at overturning the law. Opponents argue that the law circumvents existing labour and franchising regulations and could erase fast-food jobs.

California reportedly tried to move ahead with the FAST Act’s implementation regardless but a coalition of restaurants sued and a judge granted an injunction until January 13.

Tia Orr - director of government affairs for the Service Employees International Union’s (SEIU) California division - told CNBC she expects that the battle’s outcome will come down to the ballot referendum. The SEIU has accused opponents of the law of violating election law by misleading voters to garner enough signatures.

Chains like McDonald’s and Chick-fil-A have been pouring money into opposing the law, according to California records.

“Part of efforts to thwart California from passing the FAST Act is to avoid the risk of FAST Act’s key tenets spreading to other states & municipalities,” Cowen analyst Andrew Charles reportedly wrote in a December research note.

Seventeen other US states have Democratic legislatures and governors and could follow California’s lead. No states have made meaningful progress toward enacting their own versions yet.

It is also unlikely that restaurant workers will see any wage gains on the federal level this year. President Biden has expressed support for a $15 hourly minimum wage and the elimination of the tipped wage, which allows employers to pay workers as little as $2.13 an hour. If the hourly rate, combined with tips, fails to add up to a locality’s pay floor, employers are supposed to make up the difference, however, labour advocates say that often doesn’t happen. The tipped minimum wage was last raised in 1991.

This is good news for restaurant operators looking for ways to reduce their labour costs. Out of 3,000 operators surveyed by the National Restaurant Association in November, 89 per cent reportedly said that labour costs are “a significant challenge.” Nearly a fifth of respondents said that they are slowing hiring in response to higher costs elsewhere.

For that reason, laws like California’s FAST Act are a particularly threatening precedent for restaurant operators.

In addition, some restaurant employees are taking a more active role in determining their pay by unionising. 

Around 270 company-owned Starbucks locations have reportedly unionised under Workers United - an affiliate of the SEIU - over the last 13 months. Individual stores are negotiating with the big-name coffee brand, seeking better wages and improved working conditions.

Source: CNBC

(Links and quotes via original reporting)

More than half of US states will increase their minimum wage in 2023 but some restaurant workers could see even more significant gains this year, CNBC reports.

On January 1, California’s state minimum wage rose to $15.50 an hour, however, depending on the results of an ongoing court battle, fast-food workers in the state could find themselves earning as much as $22 an hour this year. And industry lobbyists say similar legislation could pass in states such as New York and Michigan.

Bars and restaurants have turned to higher wages as their primary solution to attract enough workers to meet demand after the pandemic turned an existing labour crunch into a full-blown crisis.

The labour shortage has reportedly eased over recent months but it has not completely disappeared. Employment at eating and drinking establishments was down 3.9 per cent in November compared with February 2020 (when adjusted for seasonality), according to the Bureau of Labor Statistics.

Average hourly wages for the industry have climbed 21 per cent in the same period, hitting a projected $18.99 in November. Labour costs are hard to reduce because restaurants need sufficient workers to keep up with orders but the other costs to keeping a restaurant open, such as ingredients and electricity, have also grown more expensive, further eating into operators’ profits.

If California’s government gets its way, average hourly pay for restaurant workers could reportedly soar this year. In 2022, Governor Gavin Newsom signed a bill into law that creates a 10-person council to govern the wages and working conditions for workers of restaurant chains with more than 100 locations nationwide.

The restaurant industry opposed the law - the FAST Act - and gained more than 1 million signatures from California residents to hold a referendum in 2024 aimed at overturning the law. Opponents argue that the law circumvents existing labour and franchising regulations and could erase fast-food jobs.

California reportedly tried to move ahead with the FAST Act’s implementation regardless but a coalition of restaurants sued and a judge granted an injunction until January 13.

Tia Orr - director of government affairs for the Service Employees International Union’s (SEIU) California division - told CNBC she expects that the battle’s outcome will come down to the ballot referendum. The SEIU has accused opponents of the law of violating election law by misleading voters to garner enough signatures.

Chains like McDonald’s and Chick-fil-A have been pouring money into opposing the law, according to California records.

“Part of efforts to thwart California from passing the FAST Act is to avoid the risk of FAST Act’s key tenets spreading to other states & municipalities,” Cowen analyst Andrew Charles reportedly wrote in a December research note.

Seventeen other US states have Democratic legislatures and governors and could follow California’s lead. No states have made meaningful progress toward enacting their own versions yet.

It is also unlikely that restaurant workers will see any wage gains on the federal level this year. President Biden has expressed support for a $15 hourly minimum wage and the elimination of the tipped wage, which allows employers to pay workers as little as $2.13 an hour. If the hourly rate, combined with tips, fails to add up to a locality’s pay floor, employers are supposed to make up the difference, however, labour advocates say that often doesn’t happen. The tipped minimum wage was last raised in 1991.

This is good news for restaurant operators looking for ways to reduce their labour costs. Out of 3,000 operators surveyed by the National Restaurant Association in November, 89 per cent reportedly said that labour costs are “a significant challenge.” Nearly a fifth of respondents said that they are slowing hiring in response to higher costs elsewhere.

For that reason, laws like California’s FAST Act are a particularly threatening precedent for restaurant operators.

In addition, some restaurant employees are taking a more active role in determining their pay by unionising. 

Around 270 company-owned Starbucks locations have reportedly unionised under Workers United - an affiliate of the SEIU - over the last 13 months. Individual stores are negotiating with the big-name coffee brand, seeking better wages and improved working conditions.

Source: CNBC

(Links and quotes via original reporting)