Popular Information / Judd Legum - What really happened after California raised its minimum wage to $20 for fast food workers
Judd Legum
Dec 03, 2024

What would happen to the fast food industry if it had to pay its workers something closer to a living wage?
California decided to find out. In September 2023, the state enacted a new law that required fast food restaurants with more than 60 locations nationwide to pay workers a minimum of $20 per hour a $4 per hour increase. The new minimum wage went into effect in April 2024. More than 700,000 people work in California's fast food industry.
Almost immediately, Americans nationwide were told the new law would devastate California's fast food industry. In November 2023, before fast food chains in California were even required to pay higher wages, Good Morning America aired a segment warning that customers of McDonald's and Chipotle could be faced with higher prices.
In April 2024, Good Morning America ran another piece about the "stark realities" and "burdens" restaurants would face due to the new law. The segment quoted an owner of several El Pollo Loco franchises, who claimed that she would have to "reduce hours by roughly more than 10%, simplify menus, and implement new technologies such as automated ordering kiosks." An April 2024 piece in the Wall Street Journal, citing two weeks of data after the new wage went into effect, claimed that "fast-food and fast-casual restaurants in California have increased prices by 10% overall." It also relied on anecdotes from people like John Matthews, a "62-year-old project manager" who " believes the fast-food wage law is a drag on the state economy." Matthews told the paper that he "shifted his roughly $600 in monthly restaurant spending to independent, sit-down restaurants and away from McDonalds, Chipotle and other chains.
Now, we have actual data about the impact of the law. The Shift Project took a comprehensive look at the impact that the new law had on California's fast food industry between April 2024, when the law went into effect, and June 2024. The Shift Project specializes in surveying hourly workers working for large firms. As a result, it has "large samples of covered fast food workers in California as well as comparison workers in other states and in similar industries; and of having detailed measurement of wages, hours, staffing, and other channels of adjustment."
Despite the dire warnings from the restaurant industry and some media reports, the Shift Project's study did "not find evidence that employers turned to understaffing or reduced scheduled work hours to offset the increased labor costs." Instead, "weekly work hours stayed about the same for California fast food workers, and levels of understaffing appeared to ease." Further, there was "no evidence that wage increases were accompanied by a reduction in fringe benefits
such as health or dental insurance, paid sick time, or retirement benefits."
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