When California’s fast food minimum wage rose last April from $16 to $20 per hour, industry trade groups and lobbyists warned that the increase would cost jobs, send fast food prices skyrocketing and depress the business overall. An industry-hired consultant’s interpretation of certain data recently agreed that’s what happened.
The group’s conclusions, though, are directly contradicted by multiple other studies, including one released this week by the University of California, Berkeley’s Institute for Research on Labor and Employment (IRLE).
These studies claim the wage hike hasn’t cost jobs, that fast food franchise growth in California is outpacing the rest of the country, and that the cost of a $4 burger on average has risen by only six cents. Given that economists have had less than a year to study these results and may themselves approach the numbers from different angles, the lack of consensus is perhaps not surprising.
In the meantime, the process rolls on — and that includes another potential raise of 70 cents, establishing the new fast food minimum at $20.70 per hour. Its prospects for implementation by the state’s Fast Food Council, which on Wednesday approved a motion to consider the cost-of-living adjustment later this year, were enough to prompt heavy pushback from franchise owners and their industry trade groups.
It also won’t come close to paying what fast food workers actually need to earn in order to cover their basic living costs in California — and it arrives at a time when inflation is rising, consumer confidence is plummeting, and voters in the state defeated an attempt last November to raise the minimum wage for all workers.
This is a topic with no lack of sound or fury. The 2023 law that established the $20 hourly minimum also established the Fast Food Council, which in addition to the wage question is intended to set workplace standards in an industry that historically hasn’t had strong union representation.
The nine-member body includes four people from the industry side and four from the labor side. The ninth member, an unaffiliated chair appointed by Gov. Gavin Newsom, is Democrat Nicholas Hardeman of Sacramento.
Under the statute, the council has the authority to set a wage increase of up to 3.5% or the one-year average increase in the Consumer Price Index, whichever is less — or it can elect not to raise the minimum at all.
“Even a cost of living increase at 2% or 3% isn’t much,” said Michael Reich, an economist with the IRLE and author of multiple studies on the new wage. “I don’t know why they are so slow to adopt, but I guess it’s controversial in some corners.”
Because the bill that created the wage law specified that it applies only to chains with at least 60 locations nationwide, Reich said the rate would affect roughly 540,000 of the state’s estimated 750,000 fast food workers. Even a relatively modest cost of living adjustment, though, is being fiercely opposed.
In a letter sent to the Fast Food Council in December, more than 600 franchise owners warned that any wage increase would “cripple thousands of small business owners.” The letter quoted a July 2024 survey in which 98% of local restaurant owners reported raising their food prices, and 70% either eliminating or consolidating jobs.
Reich, who has closely studied the wage law since it took effect, claims those effects to be nowhere near as severe as they’ve been portrayed. His institute’s most recent report, which updates and augments early data it analyzed last summer, suggests that the heightened minimum wage has “had no negative effects” on fast food employment — and it finds that menu prices increased only slightly.
Based on data drawn from multiple sources that include the federal Bureau of Labor Statistics and the food industry consulting company Datassential, the institute in September calculated that franchises had raised prices about 4% for items like hamburgers, cheeseburgers, fries and combo meals — the vast majority of fast food sales. With a fuller set of data to evaluate, Reich said, the institute revised the price increase in its new report to 1.5%.
At the same time, the economist said, the wage gains made by workers have been recalculated downward. Where last September’s analysis estimated those gains at 18% for covered workers, this month’s update puts the increase at about half that.
A recent study by the research group BRG concluded that 10,700 fast food jobs were lost in California between June 2023 and June 2024, implying that the looming $20 wage had cost those jobs. Both the Berkeley institute’s work and that of Harvard University’s Shift Project refute that. An article published by the Hoover Institution indicating that more than 10,000 jobs were lost, meanwhile, had to be retracted after it was found to be reliant on flawed data.
But none of this gets fast food workers much closer to covering California’s cost of living. According to the MIT Living Wage Calculator, a single adult with no children would need to earn at least $28.72 an hour — working full time — to cover basic living expenses in the state. In Los Angeles County, the figure is $27.81; in Orange County, $32.20. An estimated 200,000 fast food workers are located in those two counties.
Viewed from that angle, a potential 70-cent hourly raise could be seen as a small but significant step forward. The majority of fast food workers also aren’t full time, meaning that any raise is going to matter, even if it doesn’t actually cover the rising cost of living in the Golden State.
