California's $20 Minimum Wage Shakes Up Fast Food Industry
Geno Giovanni 4.3.24
In a historic move, California has implemented a $20 per hour minimum wage for fast food workers at chains with 60 or more locations nationwide. The new law, part of the "FAST Recovery Act" passed in 2022, went into effect on April 1st, 2024, significantly raising pay for the state's 500,000 fast food employees.
The labor unions like the Service Employees International Union (SEIU) pushed for the wage increase. SEIU argued it was necessary to provide a living wage for workers in one of the country's most expensive states. After years of activism and protests by fast food workers, the California legislature, controlled by a Super Majority of Democrats, passed the FAST Recovery Act to establish the new industry-specific minimum.
"This is a historic victory for fast food workers who have been fighting for years to earn a living wage," said SEIU California President David Huerta. "The $20 minimum will help lift hundreds of thousands of Californians out of poverty and set a new standard for the industry nationwide."
However, the fast food industry has fiercely opposed the measure, with executives warning it will force them to raise prices and cut jobs. Kerri Harper-Howie, the owner of 21 McDonald's restaurants' argued, "This wage increase only applies to us - why isn't everyone getting an increase if the current wage is not adequate?"
Indeed, major chains like Pizza Hut, Round Table Pizza, and Vitality Bowls (in San Jose) have already announced layoffs of delivery drivers and other workers in anticipation of the higher labor costs. Pizza Hut franchisees say they will have to lay off around 1,200 drivers. And Vitality Bowls owner has cut his typical staff from 4 to just 2 per location.
The CEOs of Chipotle and Jack in the Box have also stated they will need to raise menu prices by 6-8% to offset the $20 minimum wage. Industry groups like the California Restaurant Association have warned the policy could force some restaurants to close.
Panera Bread (a fast food bakery) is exempt from the law. The owner, Greg Flynn, has donated to Governor Newsom's campaigns several times, [including] one hundred thousand dollars to the governor when he was [recalled] in 2021.
In light of the recent controversy, Greg Flynn decided to increase the minimum wage to $20 per hour for all employees, regardless. The voluntary decision by Flynn addresses the ongoing issue of low wages and that his employees ensure that individuals receive fair compensation for their work.
Yet proponents of the law argue the benefits outweigh the costs.
Fast food workers and Pulitzer Prize-winning business journalist and author Rick Wartzman generally think a $20 wage is the minimum needed for a basic standard of living in California. And that higher pay can improve worker retention and productivity. The law also empowers a new Fast Food Council to set other industry standards around safety, training, and working conditions.
Ultimately, the $20 minimum wage represents a major shift in the fast food industry, with significant implications for workers, consumers, and businesses across the Golden State. As the law takes effect, the industry's ability to adapt will [be closely watched] as a test case for similar efforts nationwide.
"no choice but to raise prices already"
McDonald's franchisee, Scott Rodrick
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