McDonald's Shocking Raise to 27,000 Won per Hour Sparks U.S. Owners' Backlash: "We Will Raise Product Prices"

California, the most populous state in the United States, is embarking on a major challenge with the minimum wage in the food service industry. Starting April 1, the minimum wage for the fast food industry will be raised to $20 (approximately 27,000 KRW).

On the 31st (local time), the Associated Press reported that California will raise the minimum wage for fast food employees to $20 starting April 1, marking a 30% increase from last year's minimum wage of $15.50. The wage increase applies to fast food chains with at least 60 locations nationwide. This includes not only typical fast food such as hamburgers and pizza but also establishments selling coffee, ice cream, donuts, beverages, and candy. As a result, approximately 30,000 restaurants and a total of 557,000 fast food employees in California are expected to be affected.

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This minimum wage increase is a measure taken under the California state government's supervision of the fast food industry. Authorities decided on a significant raise considering that the majority of fast food workers are not teenagers earning pocket money but adults supporting their families. The committee, which was granted authority to oversee the fast food industry in 2022, was empowered to raise the minimum wage up to $22. Employers strongly opposed this, but eventually, a tripartite agreement was reached among labor, management, and the government.

They set the minimum wage at $20 starting April 2024 and decided to limit the annual increase in minimum wage from 2025 onward. Reactions to the wage increase sharply contrast between workers and employers. Workers are welcoming it, hoping that living conditions in California, notorious for high inflation, will improve. Ingrid Villorio, an immigrant who came to the U.S. in 2019, said, "If the minimum wage had been raised sooner, I wouldn’t have had to look for so many jobs elsewhere."

On the other hand, employers worry that the surge in labor costs could force businesses to shut down entirely. They also argue that wage increases will ultimately lead to job cuts or product price hikes, passing the burden onto workers and consumers. Alex Johnson, who operates 10 fast food outlets in the San Francisco Bay Area, said, "The minimum wage increase means spending an additional $470,000 (about 630 million KRW) annually," adding, "Because of this, we have to raise product prices by 5-15%." He also mentioned that he has no plans to open new stores or hire new employees in California.

Academics have analyzed that, based on California’s previous cases, there has been no observed reduction in jobs due to minimum wage increases. Michael Reich, a labor economics professor at the University of California, Berkeley, stated, "I was surprised that there was almost no effect on job cuts," and added, "If there was any effect, it was positive for employment."

However, difficulties began even before the minimum wage hike took effect. Some franchise restaurants have already started large-scale layoffs. For example, Pizza Hut eliminated its in-house delivery vehicles, resulting in about 1,200 delivery workers losing their jobs. Additionally, some businesses are reducing working hours, freezing new hires, and cutting employee benefits such as paid leave and break times.

From the employers’ perspective, the easiest way to cover increased costs is by raising menu prices. Fast food prices in California have recently increased by 8% annually, and with this minimum wage hike, they are expected to rise an additional 8-10%.

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