Amidst President Joe Biden’s tenure marked by surging inflation, some Americans are finding it increasingly difficult to afford a meal at McDonald’s.
Higher Wages Lead to Higher McDonald’s Prices
The recent rise in the minimum wage in California to $20 per hour—a move intended to support workers—has ironically made these once-economical eateries less so, leading to higher prices and disgruntled customers.
This adjustment marks the second wage increase in just three months, following an earlier boost from $11 to $16.
Viral Outrage Over McDonald’s Pricing
A viral TikTok video captures a customer’s frustration at a Southern California McDonald’s over a $25 deal. The clip features the customer lambasting the cost of a “40-piece chicken McNuggets bundle,” which includes four sets of 10 nuggets and two large fries, totaling $25.39 after tax.
McFlation
Dubbed “McFlation” by the outrageous customer, the video highlights the direct impact of the wage policy on consumer prices. This video has spurred a lively discussion in the comments section, with many attributing the steep prices to California’s new wage laws.
McDonald’s Clarifies Price Differences
McDonald’s has clarified that the price shown in the video is above the average cost for the same bundle at other Southern California locations, emphasizing that local franchisees set their own prices.
McDonald’s Menu Prices Double Since 2014
A report by Finance Buzz highlights a broader trend, showing McDonald’s menu prices have doubled since 2014, outpacing other chains like Starbucks, Taco Bell, and Wendy’s.
Prices at these chains have risen by 60% over the past decade, nearly double the national inflation rate.
The Accuracy of Menu Prices
McDonald’s, in particular, is reported to have increased its menu prices threefold compared to the national rate, although the company disputes the accuracy of these figures, describing the reported 2024 prices as excessively inflated.
California’s $20 Minimum Wage Debate
California’s recent decision to increase the minimum wage for fast food workers to $20 per hour has sparked significant debate over its potential repercussions.
The Ripple Effects of Wage Increases
While the move aims to enhance the livelihood of low-wage workers, it also raises concerns about increased operational costs, which could lead restaurants to reduce staff hours, lay off employees, boost automation, and hike menu prices.
Proposed Federal Wage Hike
According to a study by the nonpartisan Congressional Budget Office in December, a proposed federal wage increase to $17 an hour could potentially elevate incomes for over 18 million people but might also result in approximately 700,000 job losses.
Job Cuts Follow California’s Wage Hike
As the law starts to take effect, some fast food establishments have already begun to cut jobs. The broader economic impact includes a 1.3% decrease in employment within California’s fast-food sector from last September to January, contrasting with a 0.2% drop in overall private employment statewide during the same period.
Increasing challenge
Critics argue that the high wage mandate may make it increasingly challenging for restaurants to operate profitably and maintain staffing levels, potentially harming the very workers it seeks to support.
Adjusting to New Cost Pressures
Many operators are exploring various strategies to manage these cost pressures, including adjusting operating hours and simplifying menus.
A Landmark Wage Law for Fast Food
California’s recent legislation, Assembly Bill 1287, which Governor Gavin Newsom signed last September, introduced a $20 per hour minimum wage specifically for fast-food workers along with the establishment of a regulatory council with powers to annually adjust this wage.
Wage Hike Aftermath
This significant wage hike seems to be directly impacting employment within the industry—approximately 9,500 jobs were cut between last fall and January, indicating a 1.3 percent decrease in employment compared to only a 0.2 percent drop in the state’s total private employment during the same period.
Fast Food Chains Cut Delivery Jobs
The trend of job cuts is expected to continue, with notable reductions already underway at major chains like Pizza Hut and Round Table Pizza, which are eliminating nearly 1,300 delivery driver positions.
Robotics Rise as Labor Costs Soar
Other chains, such as El Pollo Loco and Jack in the Box, are accelerating the integration of robotics to offset higher labor costs—deploying machines for tasks like making salsa and frying foods.
Fast Food Prices Rise
The impact on consumer prices has been swift and significant since the new wage law took effect on April 1. Within less than a month, Wendy’s, Chipotle, and Starbucks have reported price increases of 8 percent, 7.5 percent, and 7 percent, respectively.
McDonald’s and other fast-food franchises are also on the path to raising their prices, with some implementing hiring freezes.
High Prices Test Fast Food Affordability
As prices escalate, the affordability of fast food in California is being tested, with the state now reporting the highest fast-food prices in the nation.
This situation is prompting concerns about the long-term sustainability of such pricing strategies, especially given the youthful demographic of the industry’s workforce.
Young Workers Feel the Pinch
About 60 percent of fast-food employees are under twenty-five years old, marking a stark contrast to other industries where only about 13 percent fall within this age bracket.
This demographic detail raises questions about the targeted nature of the wage increase and its broader implications for the industry.
Limited Experience
Young workers in the fast-food industry face unique challenges due to their lesser experience and ongoing skill development, which can limit the value they bring to their employers.
High Turnover Challenges
Additionally, these workers often require more training and tend to have high turnover rates—exceeding 100 percent annually—due to fluctuating schedules influenced by school commitments. This high turnover rate significantly increases recruitment and training costs for employers.
A Tough Decision
Given the slim profit margins in fast food, typically ranging from 5 to 8 percent, employers find themselves with limited options: either reduce their workforce or raise prices to cope with the mandatory $20 minimum wage.
Over 9,500 Jobs Lost
While labor advocates push for a “living wage” for less-skilled, often part-time workers, this can overlook the needs of fast-food owners and investors to receive fair compensation for their capital and efforts.
Unfortunately, the pursuit of living wages has led to job losses for over 9,500 fast-food workers in California since the law’s introduction last September.
Legislative Revisions Impact Fast Food Industry
This legislation, Assembly Bill 1228, was initially passed in 2022 and signed by Governor Newsom. However, it faced such strong opposition from the industry that a referendum was scheduled for the 2024 ballot, prompting legislators to draft a new bill, AB 1287.
This revised bill significantly reduced the regulatory powers of the fast-food council, leading to an agreement to withdraw the ballot referendum.
Kate Smith, a self-proclaimed word nerd who relishes the power of language to inform, entertain, and inspire. Kate's passion for sharing knowledge and sparking meaningful conversations fuels her every word.