Restaurant Minimum Wage to Impact Janitorial Pricing?

Effective on April 1, fast food restaurant workers in California who work for chains with more than 60 locations nationwide earn a minimum wage of $20 an hour under AB 1228, signed by Governor Gavin Newson in September. For fast-food chains paying workers the state's current minimum wage — $16 as of January — the new $20 wage represents a hefty 25% bump in labor costs. In addition, a fast-food council has been given the authority to increase the minimum wage by up to 3.5% a year, depending on inflation. It's not just workers currently earning less than $20 an hour who'll get a pay raise: supervisory workers will also be given raises to maintain a wage differential with the restaurant's lowest-paid workers. This change could have wider implications outside the restaurant industry.

While the $20 minimum wage only applies to limited-service restaurant workers at chains with at least 60 locations, employers in other industry sectors compete for the same workers. For instance, higher wages at McDonald's, Subway, and Burger King could apply pressure to janitorial companies to offer higher pay to better compete for labor. Think about it. If you were an unskilled, entry level worker with a choice to work for a janitorial company at $16 an hour or a fast-food restaurant at $20 an hour, which job would you pursue? This shift in the labor market is inevitable, forcing janitorial employers to adapt to attract the necessary workers to service their customers.

Favorite restaurant chains such as Chick-fil-A, Starbucks, Domino’s, McDonald’s, Burger King, Pizza Hut and Jack in the Box, among others, have raised their prices in response to the new law. Chick-fil-A raised its prices by 10.6 per cent, Starbucks raised them by 7.8 per cent, Chipotle by 6.9 per cent and Taco Bell by 4.1 per cent, according to Gordon Haskett Research Advisors.

Janitorial Price Increases on the Horizon?

The cleaning industry is labor-intensive, whereby labor accounts for up to 70% of most janitorial budgets, so pricing is severely impacted by wage rates. Higher labor costs without a corresponding increase in revenue can squeeze profit margins from janitorial companies. This may necessitate adjustments in business strategies, such as renegotiating contracts, optimizing scheduling and staffing, or implementing more efficient cleaning practices.

Higher wages in the fast-food sector can negatively impact the ability of janitorial companies to attract and retain workers if they do not also raise wages. The cleaning industry may not see an immediate shift, but it is likely inevitable. Retaining skilled and experienced janitorial staff is crucial for maintaining quality and customer satisfaction.

While higher wages can improve the quality of life for janitorial workers, the challenges for janitorial companies include managing costs, maintaining profitability, and staying competitive in the market. Adapting to wage increases requires effective communication with clients, improved operational efficiency, and yes…price increases. The issue of price inflation in California’s cleaning industry as a direct result of AB 1228 is not a question of if but when. ?