Almost half a million restaurant workers in California are going to get a big bump in their paychecks come April 1. That’s when the Fast Act bill goes into effect, which will increase minimum wage for fast-food workers to at least $20 per hour, a 29% increase from the current minimum wage in the Golden State.
The implications of the new bill are hard to fathom at this early stage, but as goes California, often goes many of the states in some way, shape, or form. California is the world’s largest sub-national economy in the world—if it were a sovereign nation, it would possess the fifth largest economy, just behind Germany at No. 4 and ahead of India at No. 6.
Maybe it makes sense—California is a historic progenitor of many fast-food franchises, where it helped launch A&W Restaurants (1919), McDonald’s (1940), Taco Bell (1961), and Panda Express (1983), each historic brand appealing to a different demographic via its proffered cuisine, a microcosm of gastrodiplomacy.
Heck, even Visa and MasterCard were born in California from post-war economic experiments by Bank of America and the Interbank Credit Card Association, respectively.
More importantly, however, California just bolstered the prospects of hundreds of thousands of current and (more importantly) future fast-food workers. As the state has hemorrhaged workers for years—to Oregon and Washington in the north, Nevada, Utah, and Colorado to the east, and to Arizona and New Mexico to the south—the new wage law can be seen as a flag firmly planted on terra firma Californian soil to beckon employees and their Arcadian dreams back to the symbol of American manifest destiny. In August 2023, The Los Angeles Times reported that California’s net move-out numbers had reached an all-time high, helped in no small part by a decreasing population of immigrants, whose numbers “plummeted” in 2020 per The New York Times. Remote work combined with cheaper out-of-state housing has also led to this decline, saying nothing about high taxes, record drought, rampant wildfires, and continually changing demographics from LA to San Francisco.
And according to an October 2023 report from The Public Policy Institute of California (PPIC), “It is unlikely that California will return to a period of rapid population growth…as the state enters this new demographic territory, promoting educational and economic success for all Californians will be a priority.”
The report concludes, “At the end of the day, California’s challenge is to ensure all residents can equitably enjoy the many advantages our state offers.”
California is a lot of things yet cheap has never been one of them. After years of increasing pressure to keep its restaurant, catering, and entertainment workers working, a generous and groundbreaking wage compromise has been reached. Perhaps the rubicon-crossing legislation has less to do with food and beverage, specifically, and more to do with the long-term prospects of the Golden State.
Still, the Fast Act legislation begs the question: How long until the dominos of other states’ minimum wages begin to waver and fall?
Worker Shortages and a Troublesome Customer Experience
Many experts believe the fallout will be swift.
“With all industries feeling the effects of inflation and interest rates remaining at historic highs, the motivation to raise minimum wages across the board is palpable,” said Thibaud Denolle, CEO of ACRELEC America, a leading technology provider in the QSR industry, to The Food Institute.
“Fast-food workers, especially new employees, have historically received lower-than-average wages, which now presents challenges as their income is inadequate for a familiar standard of living,” he added.
Denolle said that QSR jobs will be in high demand once the law passes as workers try to reduce their dining expenses in lieu of high food costs and an inflationary environment still making most consumers sweat in some regard; furthermore, as domestic workers near California decide they can simply make more by crossing the border toward the Pacific Ocean, a worker shortage may arise and the customer experience deteriorate as franchisees and business owners scramble to figure out how to keep employees happy, healthy, and paid.
“This is why a larger nationwide trend of higher minimum wages is likely,” Denolle continued.
“Most states will be unable to match the $20 per hour that California has put forth, but increases to their current wage standards will help maintain the current labor supply. Furthermore, as more technology continues to help increase productivity and the volume QSRs can handle, skilled workers will become increasingly valuable. To retain these skilled workers, higher wages must be offered.”
