California's $20 wage increase for fast food businesses will begin Monday

LIVERMORE, Calif. — Most fast food workers in California will make at least $20 an hour starting Monday when a new law is scheduled to go into effect that will give more financial security to a historically low-wage profession while threatening to raise prices in a state already known for its high costs of living.

Democrats in the state Legislature passed the law last year in part as an acknowledgment that many of the more than 500,000 people who work at fast food restaurants are not teenagers earning some money to spend, but adults working to support their families.

That includes immigrants like Ingrid Velorio, who said she started working at a McDonald's restaurant shortly after arriving in the United States in 2019.

Fast food was her full-time job until last year. She now works about eight hours a week at Jack in the Box while working other jobs.

“The $20 raise is great. I wish this would come sooner,” Velorio said through a translator. “Because I wouldn’t have been looking for so many other jobs in different places.”

The law was supported by the trade association representing fast food franchisees.

Ingrid Velorio's salary will be raised to $20 per hour. AP

But since its passage, many franchisees have bemoaned the law's impact on them, especially during California's economic slowdown.

Alex Johnson owns 10 Auntie Anne's Pretzels and Cinnabon restaurants in the San Francisco Bay Area. Sales slowed in 2024, he said, prompting him to lay off his office staff and rely on his parents for help with payroll and human resources.

Raising his employees' wages will cost Johnson about $470,000 each year.

He said he would have to raise prices anywhere from 5% to 15% in his stores, and is no longer hiring or seeking to open new locations in California.

“I try to do right by my employees. I pay them as much as I can. But this law hurts our operations badly,” Johnson said.

“I have to think about selling my business and even closing it,” he said. “The profit margin has become very slim when you take into account all the other expenses that are also going up.”

Over the past decade, California has doubled its minimum wage for most workers to $16 an hour.

The big concern during that time was whether the increase would cause some workers to lose their jobs as employers' expenses increased.

Instead, the data showed wages rising and the employment rate not falling, said Michael Reich, a professor of labor economics at the University of California-Berkeley.

“I was surprised by how small or how difficult it was to find non-employment effects. If anything, we find positive effects on employment,” Reich said.

Michael Reich, a professor of labor economics at the University of California-Berkeley, said the data showed wages rising and employment not falling. AP

Additionally, Reich said that while the statewide minimum wage is $16 an hour, many of the state's larger cities have their own minimum wage ordinances that set the rate higher than that.

For many fast food restaurants, this means the jump to $20 per hour will be smaller.

The law reflects a carefully crafted settlement between the fast food industry and labor unions, which have been fighting over wages, benefits and legal obligations for nearly two years.

The law arose during private negotiations between unions and industry, including the unusual step of signing confidentiality agreements.

The law applies to restaurants that offer limited or no table service and that are part of a national chain of at least 60 establishments nationwide.

Alex Johnson said he had to lay off staff and increase prices at his stores. AP

Restaurants that operate within grocery establishments are exempt, as are restaurants that produce and sell bread as a stand-alone menu item.

Initially, the bread exemption appeared to apply to Panera Bread restaurants. Bloomberg News reported that the change would benefit Greg Flynn, a wealthy donor to Newsom's campaign.

But the Newsom administration said the wage increase rule applies to Panera Bread because the restaurant does not make dough on site.

Flynn also announced that he would pay his workers at least $20 an hour.

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