California’s fast food workers got a $20 minimum wage, but is it working? It’s debatable

Every session of the California Legislature seems to produce at least one bill that generates high-octane political debate and media attention.

As the 2023-24 session winds down this week, Senate Bill 1047, which would impose rules on artificial intelligence developers, is generating fierce lobbying and drawing global interest.

During the final days of last year’s session, the focus was on a very different issue — whether the state should impose a $20-per-hour minimum wage for fast food workers and create a Fast Food Council to oversee working conditions.

A year before, Assembly Bill 257 created the council and empowered it to set an initial minimum wage of at least $22 an hour, while assuming that franchised fast food outlets were subsidiaries of the parent company, rather than independently owned.

The fast food industry responded with a referendum that, if ratified by voters, would cancel out the new law, thus renewing the debate in the 2023 session. A last-minute deal repealed AB 257 and substituted another measure, AB 1228, that dictated a $20 minimum wage and removed what the industry considered to be a threat to the franchise system. In return, the referendum was dropped.

The $20 wage took effect last April, but only after a new squabble erupted over which sellers of food would be covered, colored by a Bloomberg article alleging that Newsom had demanded an exemption to benefit a campaign donor who owns two dozen Panera locations in California.

Newsom declared that the story was “absurd” and gave assurances that Panera and other similar businesses would be covered. The businessman, billionaire Greg Flynn, also said he would honor the $20 wage.

End of fast food angst? Of course not.

Six months after the $20 wage took effect there’s a new debate in political, media and academic circles over its impact.

Fast food prices have been increasing, but how much higher wages are driving the rise and how fast food operations have changed are two new issues.

This month, Newsom declared that California fast food outlets had created 11,000 new jobs since the law was signed.

“What’s good for workers is good for business, and as California’s fast food industry continues booming every single month our workers are finally getting the pay they deserve,” Newsom said. “Despite those who pedaled lies about how this would doom the industry, California’s economy and workers are again proving them wrong.”

The industry didn’t agree.

 “Every day you see headlines of restaurant closures, employee job losses and hours cut, and rising food prices for consumers,” the International Franchise Association said in a statement. “Local restaurant owners in California are already struggling to cope with the $20/hour wage, as the Fast Food Council considers additional wage increases. All the while, workers and consumers are feeling the pinch.”

Brooke Armour, president of the California Center for Jobs and the Economy, an adjunct of the Business Roundtable, criticized Newsom’s declaration as reflecting just one month of preliminary data and concluding, “Despite what some are saying, the data are clear: newly passed fast food minimum wage laws are leading to job losses in California.”

Christopher Thornberg, founding partner of Beacon Economics, also was critical in an analysis of the state’s economic trends. “California’s well-intended push to reduce income inequality via wage floors is beginning to have a significant negative impact on some of our most vulnerable workers — our youth, particularly those from lower income households,” Thornberg wrote.

What California has wrought in the fast food industry could be the harbinger of more direct regulation of other industries, and not just in California, for better or worse. It’s not surprising, therefore, that its effects will be debated ad nauseam.