The One Surprising Benefit to California’s $20 Fast Food Wage Law

By: Julia Mehalko | Last updated: Jun 21, 2024

Restaurant owners and executives in California have admitted that there is one surprising benefit to California’s recent $20 fast food minimum wage law: better workers.

This revelation comes after the fast food industry has bashed California’s minimum wage law, as it’s led to many fast food eateries being forced to shut down, lay off employees, or raise menu prices.

California’s Fast Food Workers Are the Highest Paid in the US

Due to the $20 minimum wage increase, California’s fast food workers are now the highest paid in the industry across the US.

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Two fast food workers. One is cutting up a pizza and the other is watching.

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Before this increase, the highest-paid workers in the US were those in Washington State, whose minimum wage is $16.28 per hour.

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Only One Advantage So Far

Across the board, fast food chain owners and executives haven’t supported California’s new minimum wage law, which increased fast food workers’ hourly wage to $20 across the state.

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A close-up of a McDonald’s drive-thru sign seen during sunset.

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However, some restaurant bosses have admitted that higher quality workers have been applying to their fast food locations because of this higher wage.

More Job Candidates

This has also led to the industry as a whole seeing a massive influx of new job candidates. Many of these candidates are of high quality, which only benefits a fast food establishment.

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A close-up of a McDonald’s meal on a wooden table.

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These better-quality workers have seemingly begun to apply to fast-food restaurants because of the higher wages they’re guaranteed to receive.

A Silver Lining

Jim Holthouser, the CEO of GoTo Foods which owns brands like Auntie Anne’s and Cinnabon, revealed more about this surprising benefit.

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A close-up of a McDonald’s building.

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“If there’s a silver lining in all that, it’s greatly improved the availability of labor for QSR [quick-service restaurants] at least temporarily in California,” Holthouser stated.

Workers Are Choosing the Fast Food Industry

The COO and president of A&W Restaurants, Betsy Schmandt, also agreed with Holthouser’s statements, explaining that more people in California are jumping to work in the fast food industry.

A building with a KFC and Burger King logo on it.

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“We’re seeing actually a big influx of labor coming to our restaurants,” Schmandt said. “People are moving from other industries into restaurants because of this. So we’re actually seeing an increase in quality of labor.”

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The Fast Food Industry Is Booming

Before this wage increase, the fast food industry had booming earnings. This was mostly helped by a 47% price increase over a 10-year period.

Two In-N-Out cheeseburgers with fries and sauces.

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Although the average price in other areas had only increased by 29%, fast-food restaurants were seeing record profits and were still able to attract customers because their love of quick, cheap, and easy meals hadn’t gone away.

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The Fast Food Council of Representatives

Due to the new law that has changed the minimum wage for fast food workers, this law also includes the creation of a council of representatives for fast food employers and employees.

Fried chicken in white and red cardboard buckets.

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The council can increase the fast food 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 various issues, such as wage theft.

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What Classifies as a Fast Food Restaurant

The guidance on the new fast food minimum wage law also includes what a restaurant must have to be classified as a fast food restaurant.

The outside of a McDonald's restaurant.

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It mustn’t offer table service, and if it does, this has to be limited. It should be part of a chain of at least 60 restaurants and it must serve food and beverages that should either be immediately consumed or eaten when the customer returns home.

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Exemptions for Fast Food Restaurants in Grocery Stores

The guidance also provides some exemptions for fast-food restaurants located inside a grocery store. These restaurants must be more than 15,000 square feet and primarily sell groceries for consumption offsite.

The outside of a Korn's restaurant, which is inside a grocery store.

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This guidance also states that the store must sell other items in addition to groceries, earn more than 50% of its gross income from the sale of groceries, and employ the workers who work at the restaurant located inside the grocery store.

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A Temporary Benefit?

However, analysts have already warned that this new benefit the fast food industry is seeing could be only temporary.

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There are a variety of reasons why higher quality workers applying for jobs may not become a permanent feature seen throughout all fast food restaurants. Analysts point to the rest of California industries vying to increase their minimum wage as one of the sole reasons why this benefit could become short-lived.

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Other Workers Are Demanding the Same Increase

The news that some industries in California are also looking to increase their minimum wage will come as good news to workers, who have been demanding the same increase as those working in the fast food industry.

Airport workers on the runway in yellow and orange high-viz jackets next to a plane.

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This is because they are still on the same wages that fast food workers were once on and can’t afford the rising cost of living. They believe an increase in the minimum wage in their industries would help them greatly.

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Increasing the Minimum Wage in California

Many other industries, such as the sit-down restaurant industry, are already looking to increase their average minimum wage to compete with fast food chains.

A person handing another a ten-dollar bill.

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This is because more workers are flocking to these higher-paying jobs at fast-food establishments. Other restaurants will want to keep these better-quality workers — so, they’ll raise their minimum wage.

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Competing for Workers

Therefore, more industries could increase their minimum wage to further compete with the fast food industry as a whole. If this occurs, fast-food restaurants may only see this benefit for a short time.

A barista working in a coffee shop.

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Of course, for workers in California, this could be seen as a positive, as the job market may begin to offer employment that features higher pay than seen in the past few years throughout the state.

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Pressure To Match Fast Food Wages

These industries that aren’t getting a minimum wage hike are now at risk of being pressured by their employees to match the fast food minimum wage.

A cleaner in a corridor pushing along a cleaning trolley.

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Therefore, these industries risk losing their current employees to the fast food industry if they do not offer them a reasonable wage increase that helps them afford the rising cost of living.

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California’s High Cost of Living

After all, this fast food minimum wage law was only passed by the California government because fast food workers weren’t making enough to meet the state’s incredibly high cost of living.

A Los Angeles street with cars parked on it seen in California, with the Hollywood sign in the distance.

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Many in the industry had to work multiple jobs in order to meet these high costs. The law was supposed to help these workers better deal with California’s high cost of living.

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California Has the Highest Cost of Living

Out of all the states across the US, California has the highest cost of living. It is estimated that this is around 38% higher than the national average.

The San Francisco bridge going over a body of water.

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This has caused many Californians to move out of the state they have lived in their entire lives and choose to live in cheaper states, as they simply can’t afford anything in the Golden State anymore.

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The Pros and Cons of the Minimum Wage Hike

Just like many things in life, there are pros and cons to the California fast food minimum wage hike. Some of the pros are that it’s likely other industries will see a rise in minimum wage, it gives a greater disposable income, and it can bring more workers into the industry amid labor shortage gaps.

A $1 note with copper and silver coins on top.

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However, this wage increase also has some cons. These include workers being replaced by machines, a rise in prices, and reduced operating hours.

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Unintended Consequences

However, this minimum wage law has come with what many analysts are calling unintended consequences. Many employees have already been laid off since this law went into effect earlier this year.

A close-up of a Burger King logo on a window.

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Some chain locations have even completely shut down, as they’ve cited that they can not afford to pay workers $20 an hour.

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Job Growth Has Slowed in California

Despite being the most populous state in the US, California has some of the highest unemployment rates.

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In February 2024, California’s unemployment rate was 5.3%, much higher than the US average of 3.9%.

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Menu Prices Have Increased

Restaurants that haven’t laid off workers have instead chosen to raise their menu prices in an effort to keep bringing in profits while still paying all of their employees $20 an hour.

A close-up of a McDonald’s drive-thru menu.

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From the get-go, the industry has warned lawmakers in California that this minimum wage law would make fast food unaffordable. Now, many consumers in the state have echoed this statement.

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Customers Are Frustrated With This Rise

Those who are worst it by these menu rises are the customers. As many fast food customers are low-income earners, they cannot afford to eat there anymore.

The inside of a fast food restaurant with a counter and the menu screens above it.

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Instead, they choose to make their food at home or go to casual dining restaurants. As these restaurants are now only slightly more expensive than fast food outlets, people have realized they can get more for their money.

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Fast Food Managers Are Earning Even More

While many have complained that the minimum wage increase has raised the prices of fast food, the managers of these restaurants are earning even more than the workers.

A woman in the back of a fast food restaurant writing in a red book.

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The salary of a fast food manager has gone up to $83,200 a year, which has gone up by 25%. What’s worse is that this is only the average, with general managers at Raising Cane’s stores receiving an annual salary of $174,000.

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Another Benefit?

Another benefit from this law could be seen in how restaurants have chosen to think of more innovative ways to run their fast food eateries. Often, this has included adding new technology to their locations.

A close-up of McDonald’s fries in a red carton.

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However, the addition of digital kiosks and automation devices could also be seen in a negative light, especially considering these types of technology take the place of human workers.

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