Fast food workers in California will soon start making at least $20 per hour with the new law set to go into effect on Monday. This will provide more financial stability for a historically low-paying job, but could lead to higher prices in a state already known for its steep cost of living.
Last year, the state Legislature, led by Democrats, passed a law recognizing that many of the over 500,000 fast food workers in California are not just teenagers working for extra money, but adults supporting their families.
This includes people like Ingrid Vilorio, an immigrant who started working at a McDonald’s after coming to the U.S. in 2019. She used to work full-time in fast food until last year, and now works about eight hours a week at a Jack in the Box while having other jobs.
Ingrid Vilorio, an immigrant, expressed her support for the $20 raise and wished it had happened sooner, as it would have reduced her need to seek other jobs in different places.
The law received support from the trade association representing fast food franchise owners, but since its passage, many franchise owners have expressed concerns about its impact, especially amid California’s slowing economy.
Alex Johnson, who owns 10 Auntie Anne’s Pretzels and Cinnabon restaurants in the San Francisco Bay Area, mentioned that sales have decreased in 2024, leading to layoffs and requiring help from his family with payroll and human resources.
Increasing his employees’ wages will cost Johnson about $470,000 annually. He will need to raise prices by 5% to 15% at his stores and will no longer be hiring or looking to open new locations in California.
Johnson emphasized his commitment to paying his employees as much as possible, but highlighted the significant impact of the law on their operations.
He added that due to the slim profit margin when factoring in rising expenses, he is considering selling or even closing his business.
Over the last decade, California has doubled its minimum wage for most workers to $16 per hour. Concerns were raised about potential job losses as employers’ costs increased during this time.
However, data showed that wages increased and employment did not decline, according to Michael Reich, a labor economics professor at the University of California-Berkeley.
Reich expressed surprise at the minimal disemployment effects and noted that, if anything, they found positive employment effects.
Reich also pointed out that while the statewide minimum wage is $16 per hour, many of the state’s larger cities have their own minimum wage laws, which set higher rates. For numerous fast food restaurants, this means the jump to $20 per hour will be less significant.
The law represented a carefully negotiated compromise between the fast food industry and labor unions, following nearly two years of disputes over wages, benefits, and legal responsibilities. The law was the result of private negotiations between unions and the industry, including the uncommon step of signing confidentiality agreements.
The rule affects eateries that offer limited or no table service and are part of a large chain with at least 60 locations nationwide. Eateries inside grocery stores and those that mainly sell bread are not affected.
Initially, it seemed the bread exception included Panera Bread restaurants. Bloomberg News stated the change would help Greg Flynn, a wealthy supporter of Newsom. However, Newsom's team clarified that the wage law does apply to Panera Bread because the restaurant does not make dough on the premises. Also, Flynn has pledged to pay his employees at least $20 per hour.
