Working-Class Californians Forced to Pay More For Fast Food In the Wake of the State’s Minimum Wage Hike

By: Georgia | Last updated: May 07, 2024

In California, the increase in minimum wage for chain restaurant workers has resulted in significant price hikes for consumers. 

The Wall Street Journal highlights that a typical $16 meal at Chick-fil-A in Hollywood now costs $20, a substantial increase that reflects the broader impact of this legislation on food prices across the state.

Newsom’s Wage Increase For Fast Food Employees

Last year, Gavin Newsom signed legislation increasing the minimum wage for all fast-food employees from $16 to $20. 

Governor Gavin Newsom, in a dark suit, is captured from behind, gesturing while giving a speech at a podium

Source: Gage Skidmore/Wikimedia Commons

The news sparked controversy at the time. Many were in favor of increasing the salaries of employees in one of the lowest-paying industries. Others were against the decision, arguing that it would inflate menu prices.


Fast Food Prices Surge

Newsom’s new law officially went live on April 1 in California, leading to a considerable pay rise for over 500,000 employees. 

An image of an economist staring at figures on a laptop screen

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While it was aimed at ensuring fast-food workers can earn a living wage, it has led to an increase in the prices of food menu items, and its customers have been hit the hardest. 

The Unintended Consequences of Wage Laws

The 25 percent increase in meal costs is a direct outcome of the new minimum wage law that targets chain restaurants in California. 

A close-up image of a McDonald's meal on a wooden table, featuring a Big Mac in its box, a red fries container spilling over with golden fries, and a wrapped Bacon McDouble

Source: Brett Jordan/Unsplash

This significant rise in prices is making even a simple fast-food meal a costly affair for regular customers, intensifying the financial strain on many households that already face high living costs in the state.

Governor Newsom’s Plan

The rising costs associated with fast-food in California are not due to federal policies but are linked directly to state legislation. 

California Governor Gavin Newsom speaking passionately at a podium, wearing a navy suit and a light blue tie, with a California state flag visible in the background

Source: Wikimedia Commons

Local government actions, specifically those led by Governor Gavin Newsom and state lawmakers, are responsible for these changes.

Preemptive Measures by Businesses

Before the wage mandate was officially implemented, businesses anticipated the financial impact. 

A traditional Pizza Hut restaurant building with a red roof, featuring the Pizza Hut sign and logo, located in a green, tree-lined area with a car parked outside

Source: Wikimedia Commons

9,500 jobs were lost in the fast food sector before January, a preemptive response to the expected rise in operational costs caused by the wage increase.


Exemptions Creating Uneven Economic Pressure

The wage law does not apply uniformly across all eateries. It exempts restaurants with fewer than 60 locations nationally, potentially hampering the expansion of smaller chains by creating a disincentive to grow beyond this threshold due to the associated wage costs. 

A night-time view of a Starbucks coffee shop with its green and white logo illuminated on the building’s facade, highlighting the name "Starbucks Coffee."

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This selective application raises questions about the equitable treatment of businesses under state law.


Newsom's Business Practices Under Scrutiny

Despite the stringent wage requirements imposed on others, Governor Newsom’s own business ventures seem to operate under different standards. 

A close-up of California Governor Gavin Newsom smiling, dressed in a blue suit and white shirt, standing outdoors with hills in the background

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A branch of the restaurant he co-founded advertised a busboy position at $16 per hour, below the $20 mandated wage.


Newsom's Management of Business Interests

Governor Newsom has stated that he placed his business interests “into a blind trust after he was elected Governor in 2018 and doesn’t run its restaurants on a daily basis.” 

Governor Gavin Newsom speaking at a California Democrats event, standing at a podium with a blue background that features the words "California Democrats."

Source: Wikimedia Commons

This claim is intended to separate his legislative actions from his personal financial interests.


Wage Increases Affecting Business Profitability

The new wage laws are making fast-food restaurants more lucrative workplaces due to higher wages, but they are simultaneously reducing profitability for owners. 

Close-up view of two cheeseburgers with melted cheese, lettuce, and tomato on a sunlit plate, showcasing the juicy texture of the beef patties and fresh vegetables

Source: Wikimedia Commons

This creates a distorted economic landscape where businesses in other industries, like grocery stores that sell prepared food, face less financial strain from wage policies.


Workforce Shifts and Economic Adjustments

The wage increase is expected to shift the workforce dynamics within the food service industry, making fast-food jobs more desirable due to better pay. 

Inside a Popeyes Louisiana Kitchen showing the order counter with digital menu displays above, featuring various meal options and prices. A worker in an orange uniform is visible behind the counter

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This could lead to staffing challenges in sectors that do not benefit from similar wage protections, altering the economic balance across various service industries.


The Rising Cost of Fast Food Dining

The increasing cost of dining at fast-food restaurants is turning what was once an affordable option for many families into a luxury

A Taco Bell meal featuring a soft taco with spicy sauce, lettuce, and cheese, accompanied by seasoned fries and a Taco Bell branded cup in the background, served on a tray with Taco Bell logos

Source: Wikimedia Commons

The financial burden of these meals places additional stress on households struggling to manage their budgets in one of the country’s most expensive states.


Research Groups Say Fast Food Menu Items Have Increased

According to a study released by Kalinowski Equity Research, menu items at many of California’s most beloved fast-food restaurants have significantly increased. 

A Wendy's meat cube burger being unwrapped.

The Food Guy/Youtube

Wendy’s saw the greatest increase, with an 8% hike. Whereas Chiptole’s prices had surged by around 7.5%.


Customers Unhappy With Price Hikes

“I used to pay $10. Now it’s $13. Over time, that’ll be like $6 more or  $9 – it just keeps going,” Owen Peralta, a Chipotle customer in Brea, said

A Chipotle meal served with chips and a drink.


“If I’m going to start paying restaurant prices, then I’m going to have to go somewhere else.”


California Restaurant Association Release Statement

In response to the increase in menu item prices, the California Restaurant Association released a statement.

An image of several reporters standing on the street during a press release

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“Since it took effect, job losses, reduced working hours, restaurant closures, and higher prices for California’s inflation-weary consumers have been ongoing,” the group said.


Migration Trends Among Californians

The escalating costs of living and dining in California may be influencing a trend where residents choose to relocate to more affordable regions. 

Sunset view of a coastal resort with palm trees, a series of beachfront buildings, and a rugged cliff overlooking a serene beach

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This migration could have long-term implications on the state’s demographic and economic landscape, possibly reducing its population and labor force.


Reflecting on the Economic Landscape

As prices continue to rise, many Californians are feeling the economic squeeze, challenging the state’s reputation as a place of opportunity and prosperity. 

Aerial view of Los Angeles cityscape showing dense urban development, high-rise buildings downtown, sprawling neighborhoods, and distant mountains, under clear skies

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The impact of wage laws on everyday expenses is becoming an increasingly significant issue, affecting the quality of life and economic stability of its residents.


Restaurant Owners Further Forced to Increase Menu Prices

Californian restaurant owners argue the minimum wage increase is just the beginning of their problem. 

Overhead view of a bustling upscale restaurant with patrons seated at white linen-covered tables, waiters in motion, and a central dessert display under an ornate ceiling

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Now, Newsom has signed a new law that would ban “junk fees” in California beginning in July. Ultimately, this prohibits any restaurant from implementing surcharges. 


Surcharges Help Restaurants Provide Employee Benefits

Many restaurant owners claim they rely on surcharges to help provide their employees with benefits, including health care. 

A young male waiter in a white shirt is handing over a card payment device to a seated female customer with blonde hair

Source: Freepik

However, as the new law prohibits this, they will be forced to increase their menu prices further. 


Restaurant Owner Shares Opinion

Speaking with CBS News Bay Area, Golden Gate Restaurant Association Director Laurie Thomas explained it will force restaurants to choose between lower wages for employees and higher prices for customers. 

Many people at a bar and restaurant, sitting down and eating.

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“So, now, do you take their rate down and do you go to an old-fashioned tip model and say to your servers, ‘You have to tip the whole house, but that drops everybody’s salaries’ or do you raise your prices 20%, 25%?” Thomas said.


Make the Customer Happy

According to Thomas, some customers may be understanding when confronted with higher prices. 

An Oberweis Dairy employee in a grey shirt smilingly hands a paper bag to a customer across the counter

Source: Oberweis/Facebook

“It might make a lot of customers happier. They might say, ‘We understand why prices went up.’ Let’s hope that happens. But I don’t know if our industry can hope that’s what happens. They’re still struggling. It’s been a tough year.”


Higher Prices For Consumers

Speaking with CBS News Bay Area, Food Writer Marcia Gagliardi said the new law will ultimately result in higher prices for consumers. 

A retail setting with a female cashier assisting a customer at a checkout counter. The customer is using a digital device for payment

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“I see restaurants easily raising prices 5%, 15%. It’s going to be tricky,” she told the outlet. “We’re going to be seeing even higher prices based on this unfortunate interpretation. But not all is lost. … Things could change,” she said


$21 Subway

While fast food and restaurant prices in California are prominent in the media, prices are reaching unfathomable heights across the US.

A photograph of a Subway sandwich on a wooden table

Source: Reddit

According to a Reddit post published over six months ago, the user “bought a Subway Sandwich for 21 bucks,” a price that shocked many online. 


All Prices Continue to Rise in the US

While comments suggested it was most likely one of the specialty sandwiches, others claimed no meal that feeds just one person should cost $20. 

Costco food court menu, including pizza, chicken bakes, peanut butter and jelly, and more

Source: Reddit

Nonetheless, the price showcases that fast food across the US is becoming worryingly expensive.