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Half a million fast food workers in California are now making at least $20 per hour after a minimum wage hike came into effect on Monday.
Restaurant chains with over 60 nationwide locations including the likes of KFC, McDonald’s, Pizza Hut, and Starbucks must now increase the minimum wage given to employees by 25%, up from the previous rate of $16 per hour.
This makes California fast food workers the highest paid in the U.S., where the cost of living is an estimated 38% higher than the national average.
The bump is the result of a long fight by fast food workers, who are among the lowest paid across the U.S. economy.
The law has also seen the creation of a council with representatives from fast food employers and employees. The council can increase the minimum wage each year by 3.5% or in line with inflation – whichever is higher.
It can also advise and work with California state agencies on worker safety standards and investigations into issues such as wage theft.
“I definitely think it’s a very big deal,” a McDonald’s cashier, Jaylene Loubet, told CNN. “What we’re fighting for is not unreasonable. We’re just asking for what’s fair.”
Another ex-McDonald’s employee, Ingrid Vilorio, who now works at Jack in the Box told The Independent the wage hike would have helped with her job search.
“The $20 raise is great. I wish this would have come sooner,” she said. “Because I would not have been looking for so many other jobs in different places.”
Whilst many workers like Loubet and Volorio see the new rate as a victory, there are concerns it will lead to steep rises in operating costs for fast food employers in California.
Many employers have already taken steps to combat the elevated minimum wage with price hikes, reduced hours, and layoffs.
Alex Johnson, a franchise owner of ten Auntie Anne’s Pretzels and Cinnabon restaurants says a tough start to 2024 has already caused him to layoff office staff, with the outlay for extra wages set to cost about $470,000 per year.
Johnson tells The Independent he now relies on his parents to help with payroll and HR, will raise prices by around 5% to 15% in the stores, and is freezing hiring for the foreseeable future. “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 explained.
Brian Hom, who runs two franchise locations of Vitality Bowls, similarly tells NPR he plans to offset higher wages for employees by raising prices by 5% to 10%. "I'm happy that my employees are going to make more," Hom notes. "But the impacts to the business are the concern... Will I be able to sustain the business?"
The Wall Street Journal has also reported many major franchises, particularly pizza chains, have made layoffs in preparation for increases in operating costs. Pizza Hut, Round Table Pizza, and Southern California Pizza Co., for example, all made significant layoffs to delivery drivers in 2023 and 2024.
Round Table parent FAT Brands told Fox Business: "The franchisee is transferring their delivery services to third-party. While it is unfortunate, we look at this as a transfer of jobs.”
"As you know, many California restaurant operators are following the same approach due to rising operating costs,” the statement continued.
Other franchise owners have faced criticism for their response to the pay hike.
Greg Flynn, the owner of multiple California Panera Bread restaurants, was in the firing line after accusations his stores would benefit from a carveout that would exempt them from the ruling – but Flynn later announced he would raise the minimum wage for employees to $20 per hour.
Restaurants that produce and sell bread as a stand-alone item are exempt from the minimum wage increase, as are fast food stores operating inside a grocery establishment.
For jobs outside fast food, the minimum wage varies between different municipalities, but the state-wide rate remains $16 per hour.
