When California Governor Gavin Newsom signed a law in 2023 that increased the state’s minimum wage for fast food workers to $20 per hour, he pledged that they would enjoy a “stronger voice and seat at the table.” But the California fast food industry has lost more than 19,000 jobs since the law went into effect on April 1, 2024, according to a recent analysis by the Employment Policies Institute. Since Newsom signed the law in September 2023, California has been responsible for more than a quarter of America’s fast food job losses.
The law has had many other deleterious consequences for workers and consumers. One study by Berkeley Research Group found that food prices have increased by 14.5 percent because of the wage increase. Another analysis by EPI showed that even fast food workers who are still employed have seen their scheduled hours shrink. And data from the Bureau of Labor Statistics have revealed that California’s year-over-year fast food employment growth is at its lowest level since the Great Recession, leaving aside declines during the Covid-19 pandemic.
Governor Newsom has shown no sign of recognizing any of these issues.
“If you boost the hourly wage, but now businesses are limiting how many hours they’re giving people and you can’t pick up overtime shifts and you can’t pick up additional shifts when you want to and have that flexibility to do so, now you’ve erased any sort of gains,” Rebecca Paxton, a research director at EPI, told National Review. “We’re seeing these large job loss figures, but even the folks that kept their jobs, they’re suffering too.”
Newsom’s law also established the California Fast Food Council — a nine-member body composed of business owners, workers, and union members — to oversee fast food industry regulations. The council has the power to raise the minimum wage by an additional 3.5 percent this year, but such an increase has yet to materialize. Paxton believes this is because fast food franchise owners have begun to speak out against the strain the law has placed on their businesses.
“[The council has] held several public forums where folks came and explained, ‘I’m a local business owner. I employ this many people. I’m just trying to keep them on staff. And I can’t because of the way that this law is hurting my business,’” Paxton said. “So folks are certainly making their voices heard.”
Michaela Mendelsohn, a member of the Fast Food Council, is the CEO of Pollo West Corporation, a franchisee for El Pollo Loco restaurants on the West Coast. She told National Review that the minimum wage increase has forced her to “raise prices dramatically.” As a result, her customer base has declined.
“Mid-range restaurants, full service like Chili’s, have really jumped in and taken advantage of it to increase their share of the pie,” she said. “It’s no longer an affordable option for families to buy food at fast food outlets.”
Mendelsohn hopes that El Pollo Loco’s unique product offerings will help the brand stand out as conditions continue to tighten. But she is anxious about the future.
“In my six stores, we have increased prices, but we’ve chosen to take more of a hit on our bottom line to preserve transactions,” she said. “So we’re trying to make do with less profit. It’s tough. We have one of our stores that we may close at some point or sell. We have to really keep tearing down where we can to survive.”
The situation is similarly challenging for Nareh, who manages an L&L Hawaiian Barbecue restaurant in Los Angeles alongside her father. She told National Review that she raised menu prices when the law came into effect but has attempted to avoid another increase since then. In the coming months, however, she expects to have no choice. The financial burden of the new minimum wage has already forced her to reduce the number of staff at the restaurant, and she is concerned about keeping morale high among those who remain.
“When you think about it, [front of house employees] make even more than our back of the house, in a way, because of tips,” she said. “So now we have to stay competitive with that because we want to be fair with the back of the house. It’s just like a domino effect, unfortunately.”
The dawn of artificial intelligence has already led fast food chains such as Wendy’s to experiment with automated services. If it remains difficult for franchises in California to manage the costs of employment, they may turn to automation instead.
So far, Mendelsohn has simplified the ordering process in her stores by adopting self-service kiosks. She is preparing to test AI’s other potential uses, including at the drive-through. “There’s still gonna have to be someone listening in to make sure that there aren’t any issues,” she said. “But we will be able to increase efficiency. So I could see that there will be some reduction in hours based on that being successful.”
But despite these advancements, both Mendelsohn and Nareh are concerned about the future of the industry. Although many franchises have already made significant reductions to staff and their hours, Mendelsohn believes we have “only seen the tip of the iceberg.”
“You’re going to see other big corporate decisions like Starbucks where they’re closing 38 stores in California — a good number of those in L.A,” she said. “But for someone who only has one, two, three stores, and one or two of those stores is losing money, they pretty much have to wait till the lease is up or negotiate a payout with the landlord. . . . So a lot of closures are going to come along the way this year and next when leases come due.”
Nareh is particularly worried about the impact of the wage increase on smaller businesses with lower revenues. “I have a family friend that has a restaurant and they just can’t find staff or it’s just hard for him to break even with that minimum wage,” she said. “There’s a lot of vacancies that I’ve seen just around L.A., which kind of sucks.”
Like Mendelsohn, Nareh wishes that the California government would concentrate on other policies to lower the state’s high cost of living. “I live with my parents and I’m 32 and I can’t even see myself moving out right now until I’m married or something,” she said. “I think it’s just so hard to just live on your own. So just try to maybe just help Angelenos in different ways.”