California will raise the state minimum wage Tuesday by $1, to $9 per hour, the next step toward an eventual increase to $10 an hour by 2016.

State lawmakers approved the wage increase in September, which allows for a gradual increase designed to ease the impact on businesses.

Angie Pappas, director of communications for the California Restaurant Association, said restaurant operators are ready for the wage hike, but menu price increases will likely help offset the increased labor costs.

“People are prepared and ready for it, but that doesn’t mean it will be easy,” said Pappas. “Operators will tell you they’ll do everything possible not to raise prices because they see the effect that has on traffic. But we will see prices go up as a result.”

Sean Kohmescher, chief executive of the three-unit Temple Coffee chain in Sacramento, said his company has posted signs warning customers that the 12-percent increase in the minimum wage will result in an across-the-board menu price increase of about 7 percent starting Tuesday.

Kohmescher said the chain’s menu prices will actually rise 4 percent to 7 percent, but they decided to use the higher end of the range for full disclosure.

Customers’ reactions to the sign have been mixed, he said.

“Someone tweeted that we were being greedy, but others are supportive, though some are against it,” he said. “Then there are some who don’t even know what the minimum wage is.”

Even within the industry, Kohmescher said opinions are mixed.

“I personally think it’s owed to the people who work at that wage,” he said. “It’s a huge amount of our workforce.”

Customers may not realize that the wage hike impacts the entire wage scale for companies like his, not just those at the bottom of the ladder. Temple Coffee revised its pay structure, including raising salary caps, to adjust to the new rate.

Many in the industry breathed a sign of relief last week when proposed legislation that would have raised the state’s minimum wage even further, to $13 an hour, did not make it past a panel in the Assembly.

Business groups reportedly asked lawmakers to wait for the current legislation to take effect to gauge the impact, according to the Sacramento Bee.

Pappas said, “Our fears were put a little at ease. At least we’ll have a full year and a half to analyze the repercussions before it becomes $10 an hour.”

Still, proposed wage hikes in individual cities remain a challenge, particularly for chain operators, she said.

San Francisco will vote on a ballot measure in November that would raise the city’s rate to $15 an hour. San Diego lawmakers are considering an increase to $11.50 per hour. And Los Angeles officials are considering a minimum wage hike to $15.37 per hour for workers in large hotels.

Meanwhile, the Employment Policies Institute, which has long opposed the minimum wage increase, is planning to post billboards in Los Angeles and San Francisco on Tuesday that will discuss the unintended consequences of the wage hike, including the loss of jobs, specifically for teen workers, and the expected shift to technology to replace human workers.

Michael Saltsman, the group’s research director, argued that increasing the wage floor to $9 will put jobs further out of reach, particularly in a state with four of the worst metropolitan areas for youth unemployment.

For kids ages 16 to 19 with less than a high school diploma, four of the five cities with the worst unemployment rates are in California: Riverside, Los Angeles, San Diego and San Francisco.

“California already has one of the worst job markets for young adults in the country, and the state’s legislators are about to make it worse with a two-step wage hike to $10 an hour,” said Saltsman in a statement.

Contact Lisa Jennings at lisa.jennings@penton.com.
Follow her on Twitter: @livetodineout