On April 1, California’s fast food workers will begin earning $20 an hour — the highest minimum wage in the country for this industry. That will affect workers, franchise owners, and customers. Here’s a breakdown of what it could mean for each group.
Who does this new $20 an hour minimum wage apply to within the fast food industry?
It applies to workers employed by fast food chains that have more than 60 locations nationwide. Currently, the only exceptions are locations that have on-site bakeries. There was some recent drama over this after Bloomberg reported that Panera Bread would qualify for the exception, and the owner of the chain is a political ally of Governor Gavin Newsom. Newsom denies playing favorites, and Panera Bread says it will honor the new minimum wage, but Republican lawmakers are calling on the state attorney general to investigate.
That aside, this will affect a lot of workers in a state where the minimum wage is currently $16 an hour. The number of fast food workers in California totaled 394,660 in 2022, according to the most recent data from the Bureau of Labor Statistics. They are also the second largest group of minimum wage workers in the state behind home health aids, according to a 2024 report by California’s nonpartisan Legislative Analyst's Office.
Jaylene Loubet is a McDonald’s cashier who participated in a recent rally for fast food workers ahead of the wage increase. Photo by Megan Jamerson/KCRW.
Workers in the industry who lobbied for this wage increase say the higher wages will allow them to cover basic necessities like rent, groceries, and medical bills.
“The pay is something that we use to survive. It's what we're living off,” says Jaylene Loubet, a McDonald’s cashier who currently makes $17.25 an hour. “It's important to understand that we need those $20 … because those couple of dollars more makes a difference.”
For the last six years, Loubet has worked part-time while completing her bachelor’s degree in anthropology and cosmetology license. Her mom also works in a McDonald’s kitchen full time. Those two salaries support their family of four in a one-bedroom apartment in Glassell Park.
Wages are often the biggest costs for business. How will this change affect them?
Several big-name companies like McDonald’s and Chipotle recorded an increase in profits last year. And some economists say it’s going to affect restaurants owned by corporations like these differently than individual franchise owners.
Pepperdine University economist David Smith says that a big company can more easily absorb the increased labor cost over all of its company stores. He is more concerned for individual franchise owners, though he doesn’t believe it was the intent of the wage increase to cause a burden.
“But I do think, coming out of COVID, restaurants and small business owners have had a challenging time in many cases, making ends meet … adapting to consumers, changes in preferences about where they eat, and this could potentially serve as another hurdle for them,” says Smith.
He also points out data showing higher wages can harm the economy, and conflicting data showing it doesn't. For instance, Brian Callaci, a chief economist at Open Markets Institute who studies the fast food industry, says higher wages can reduce employee turnover and result in cost savings for business owners.
After the state minimum wage was increased to $15 an hour in 2022, there wasn't a major fallout for businesses or workers. Instead, the raise gave workers more spending power, which Callaci says can even benefit the fast food restaurants they work for. “Let's not lose sight of the fact that these are life-changing raises, and that's a huge positive, and it's good for the economy,” says Callaci.
What can consumers expect when they visit fast food restaurants?
Customers can expect higher menu prices. McDonald’s, Chipotle, and Jack in the Box, which also owns Del Taco, say they are planning to pass on the cost to customers. People can also expect more self-serve kiosks, which Shake Shack and El Pollo Loco told investors they will be adding. This could mean fewer cashiers or reduced hours for workers.
Also, most delivery orders from Pizza Hut will now be handled through third-party apps like DoorDash, Grubhub, and Uber Eats. Two major Pizza Hut franchises in California laid off 1200 delivery drivers in anticipation of the wage increase in March.
