Most fast food workers in California will be paid at least $20 an hour beginning Monday when a new law is scheduled to kick in giving more financial security to an historically low-paying profession while threatening to raise prices in a state already known for its high cost of living.
Democrats in the state Legislature passed the law last year in part as an acknowledgement that many of the more than 500,000 people who work in fast food restaurants are not teenagers earning some spending money, but adults working to support their families.
That includes immigrants like Ingrid Vilorio, who said she started working at a McDonald’s shortly after arriving in the United States in 2019. Fast food was her full-time job until last year. Now, she works about eight hours per week at a Jack in the Box while working other jobs.
“The $20 raise is great. I wish this would have come sooner,” Vilorio said through a translator. “Because I would not have been looking for so many other jobs in different places.”
The law was supported by the trade association representing fast food franchise owners. But since it passed, many franchise owners have bemoaned the impact the law is having on them, especially during California’s slowing economy.
Alex Johnson owns 10 Auntie Anne’s Pretzels and Cinnabon restaurants in the San Francisco Bay Area. He said sales have slowed in 2024, prompting him to lay off his office staff and rely on his parents to help with payroll and human resources.
Increasing his employees’ wages will cost Johnson about $470,000 each year. He will have to raise prices anywhere from 5% to 15% at his stores, and is no longer hiring or seeking to open new locations in California, he said.
“I try to do right by my employees. I pay them as much as I can. But this law is really hitting our operations hard,” Johnson said.
“I have to consider selling and even closing my business,” he said. “The profit margin has become too slim when you factor in all the other expenses that are also going up.”
Over the past decade, California has doubled its minimum wage for most workers to $16 per hour. A big concern over that time was whether the increase would cause some workers to lose their jobs as employers’ expenses increased.
Instead, data showed wages went up and employment did not fall, said Michael Reich, a labor economics professor at the University of California-Berkeley.
“I was surprised at how little, or how difficult it was to find disemployment effects. If anything, we find positive employment effects,” Reich said.
Plus, Reich said while the statewide minimum wage is $16 per hour, many of the state’s larger cities have their own minimum wage laws setting the rate higher than that. For many fast food restaurants, this means the jump to $20 per hour will be smaller.
The law reflected a carefully crafted compromise between the fast food industry and labor unions, which had been fighting over wages, benefits, and legal liabilities for close to two years. The law originated during private negotiations between unions and the industry.
The law applies to restaurants offering limited or no table service and which are part of a national chain with at least 60 establishments nationwide. Restaurants operating inside a grocery establishment are exempt, as are restaurants producing and selling bread as a stand-alone menu item.
At first, it appeared the bread exemption applied to Panera Bread restaurants. But the Newsom administration said the wage increase law does apply to Panera Bread because the restaurant does not make dough on-site. Also, the owner has announced he would pay his workers at least $20 per hour.
As California prepares to implement the new law increasing the minimum wage for fast food workers to $20 per hour, there are important implications to consider. This groundbreaking legislation marks a significant step towards providing financial security for a historically low-paying profession. It recognizes that many fast food employees are not just teenagers earning pocket money but rather adults working to support their families.
While this law brings much-needed relief to workers like Ingrid Vilorio, who has experienced the challenges of living on a fast food wage, it has also sparked concerns among franchise owners. The increasing cost of labor has put a strain on businesses already grappling with a slowing economy. Alex Johnson, the owner of multiple fast food restaurants, has shared his struggles of having to lay off employees and raise prices to compensate for the higher wages.
Despite these concerns, empirical data from the past decade has shown that previous increases in the minimum wage did not lead to significant job loss. In fact, it resulted in higher wages and stable employment. This suggests that the fears of widespread unemployment due to increased labor costs may be unfounded.
Moreover, it is worth noting that California’s minimum wage is not uniform across the state. Many cities have their own minimum wage laws, surpassing the statewide rate. For fast food restaurants already operating in these cities, the transition to a $20 per hour minimum wage may be less dramatic.
The new law represents a delicate compromise between the fast food industry and labor unions, who have long been at odds over fair wages and worker rights. The private negotiations that led to this legislation demonstrate a collaborative approach towards finding a middle ground.
Looking ahead, the implications of this law extend beyond California’s borders. It sets a precedent for other states to reconsider their minimum wage policies and prioritize the financial well-being of workers. As the demand for fair wages gains traction nationwide, industries across the board may face similar challenges and opportunities.
In light of this development, it is crucial for businesses to adapt and innovate to mitigate the impact of rising labor costs. Exploring technological advancements, streamlining operations, and investing in employee training can help offset the financial burden. Furthermore, policymakers should consider providing additional support and resources to industries facing increased labor costs.
Ultimately, the $20 per hour minimum wage law for fast food workers in California represents a significant milestone in the ongoing fight for fair wages. It not only addresses the immediate financial needs of workers but also sparks broader conversations about income inequality and the role of businesses in society. As the industry navigates these changes, proactive measures and collaborative approaches will be essential in ensuring a sustainable and equitable future.