New California fast-food minimum wage takes effect April 1

Starting April 1, fast-food workers in California will now be paid at least $20 per hour, according to a law passed in the state in 2023. This is up 25% from California’s general minimum wage of $16.

According to The Associated Press, the law applies to fast-food restaurants “which are part of a national chain with at least 60 establishments nationwide.” All fast-food employees are eligible, whether they work for a franchisee or the national brand.

How does the wage increase help workers?

Fast-food jobs are notorious for low wages and carry the public perception of being held predominantly by teenagers in high school and college, not adults supporting themselves full time.

“The workers are often women, immigrants and people of color; many live below the poverty line,” NPR reported.

Many of the state’s 500,000 fast-food employees, though, are adults supporting themselves and/or their families, AP reported. In a state known for a high cost of living, this change gives fast-food workers more financial control.

Ingrid Vilorio, a fast-food worker in California, told AP, “The $20 raise is great. I wish this would have come sooner. Because I would not have been looking for so many other jobs in different places.” She works multiple jobs, one of which is part time at a Jack in the Box.

For many, however, this raise doesn’t do enough to meet the state’s soaring cost of living.

“Even though it’s a big help, people need to realize that $20 compared to the cost of living in Los Angeles, it’s still not enough to feel secure,” Jaylene Loubett told NPR.

Loubett has worked at McDonald’s for six years and shares an apartment with her parents, whom she supports. She said the raise will alleviate some financial stress.

Historically, California has often been a leader in progressive business decisions, with other states following suit later. In the coming years, other states may take note and pass similar legislation within and out of the fast-food industry, improving worker pay across the board.

How does the new minimum wage impact the bottom line?

While workers celebrate the wage increase, companies lament it for its impact on their bottom lines. Amid rising operation costs, business owners are discussing shifting the burden of rising wages to the consumer.

According to Brian Hom, who runs two franchise locations of Vitality Bowls, customers are likely looking at a 5-10% increase in prices of their menu items. “I’m happy that my employees are going to make more,” Hom told NPR.

“But the impacts to the business are the concern. ... Will I be able to sustain the business?”

As wages rise, chain and franchise owners may try to offset these costs by raising prices, adding automation, cutting hours or even closing down, NPR reported.

Alex Johnson, who owns 10 Auntie Anne’s and Cinnabon franchises in California, “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,” per AP.

“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 told AP.

Some business owners and worker’s advocates see it differently, though. Lauren Crabbe, owner and CEO of Andytown Coffee Roasters in San Francisco, told CNBC, “If a multinational company making millions in profit cannot afford to pay the people making their product and serving their customers at least $20 (an hour) in 2024, then they do not have a viable business model.”

Crabbe is excited by the legislation, but “thinks the legislature missed an opportunity to target giants in other industries, such as retail,” per CNBC.

Crabbe’s sentiment is echoed by Joseph Bryant, executive vice president for the Service Employees International Union, which backed the law.

He said livable wages “should be a priority for corporate fast-food companies.”

Will the fast-food minimum wage affect other industries?

The wage increases won’t only impact the fast-food industry in the long run.

For some business owners like Jennifer B. Perez, who runs Growing Roots in Long Beach, California, remaining competitive for workers alongside bigger businesses might become more difficult amid the wage increase.

“Most small businesses can’t just do a straight 25% increase across the board, or price increases across the board,” she said, per CNBC.

Daniel Zhao, lead economist for career site Glassdoor, said, “I think we are going to see spillover effects within food service, but beyond that, we should expect to see spillover effects to other industries that are competing for this talent,” per CNBC.