One year in, California’s fast food wage hike brings higher pay, debatable job numbers

By Natasha Chen, CNN

Los Angeles (CNN) — Edgar Recinos no longer has to choose between paying rent and buying groceries.

As a cook at a Wingstop restaurant in Los Angeles, Recinos got a significant wage bump last year — one of half a million fast food workers taking part in a great labor experiment.

California passed the Fast Food Accountability and Standards Recovery (FAST) Act in April of 2024 amid vocal support and fierce opposition. The first-of-its-kind policy increased the starting wage for California fast food workers to $20 per hour, which is higher than the overall state minimum wage. It also established a statewide council that sets wage and safety standards at fast food restaurants with more than 60 locations nationwide, like McDonald’s, Jack in the Box, Burger King and Subway.

But one year later, the initial impact is a mixed bag. Economists are divided over the effect on employment. Workers do earn more, but many complain their hours have been cut. Fast food restaurant owners tell CNN they have been trimming employee hours and instituting hiring freezes to offset the cost of higher wages.

Recinos, like many, says his regular hours have been cut. When he doesn’t get to fill in to make up the time, he finds himself “in the same situation before the (wage) increase.”

Decline in California fast food jobs?

As of March, employment at California’s limited-service restaurants fell 3.1% from the year before, according to the St. Louis Federal Reserve using seasonally adjusted data from the Bureau of Labor Statistics. That’s more than 22,600 jobs lost at fast food restaurants that both did and did not fall under the policy.

While that drop is in line with losses in the broader leisure and hospitably sector in the state, it’s a more pronounced downswing than the national trend for fast food restaurants, BLS data shows.

Economists are clashing over whether the $20 wage is to blame.

Christopher Thornberg of Beacon Economics, who published a two-page commentary about the sector’s losses in March, wrote the findings “undercut much of the recent analysis released by pro-labor groups which have been claiming that the Fast Act has had little impact on (the) limited-service restaurant industry in California.”

While Thornberg told CNN it’s premature to determine if the FAST Act is to blame for the job losses, he is seeing signs of negative cost.

“There is no such thing as a costless policy,” he said. “Every part, every policy must, by definition, have some cost. And it’s up to society to figure out if that trade-off is worth it, right?”

But Michael Reich, chair of the Center on Wage and Employment Dynamics at the University of California, Berkeley, told CNN there is no evidence the FAST Act is at the root of any job loss.

Reich did his own analysis of the data, comparing jobs at California’s large fast food chains to those in states where the minimum wage did not change, as well as California’s full-service restaurants and smaller fast food chains not subject to the policy. He says he found “no significant negative employment effect.”

Instead, he points to California’s population loss and slower economic growth compared to other states among the factors influencing job number fluctuations.

“If there are more people, there is going to be more demand for fast food. The different population growth is not because of minimum wage,” Reich said. “So, if you don’t control for that, you’re looking at a correlation. That’s not a causation.”

Higher wages, not enough hours in a week

California fast food workers are now the highest paid in the nation.

Pay for impacted workers jumped 8% to 9% on average since April 2024, according to Reich. They also earn more than other Californians making minimum wage at $16.50 per hour.

That kind of money has been life-changing for Selvin Martinez, who works at a Weinerschnitzel in San Jose.

“Before the wage increase, I struggled to keep up with expenses. I limited my purchases. I limited what I ate,” Martinez said through an interpreter. “I have been able to cover all of my bills, help my family financially, my savings have grown, and I’m thankful to God, because life feels easier now that I’m not as worried financially.”

Management did, however, shift the opening of Martinez’s restaurant one hour later, cutting his weekly schedule shorter by a few hours.

He’s not alone. Some workers tell CNN they now work fewer hours.

It’s a hard metric to track as economists say there is no reliable data on work hours in fast food. But Recinos, who got a pay bump from $17.25 to $20 in April 2024, says he remembers working more back then.

Recinos now works about 20 hours a week at Wingstop but fights to get more time on the schedule. He pads his hours by filling in for absent co-workers or during higher-demand periods like the Super Bowl.

Recinos said managers blame the shorter hours on labor costs.

“It makes no sense. Because if you are cutting hours to your current workers, why are you hiring new people and blaming the increase of the wage?” he said.

The Wingstop management where Recinos works told CNN they use a standard labor matrix to schedule employees based on business volume and location. Management added that it’s not related to the FAST Act, and they’re committed to providing a consistent schedule and paycheck for their employees.

A not-so-happy meal

While the policy has helped some in the workforce, some owners face a different picture.

Kerri Harper-Howie says she’s had to dip into long-term savings for her 40-year-old family business to keep it afloat, with the account down 30% in just nine months.

“We have literally been like, ‘Do we need to leave California?’” Harper-Howie said.

The daughter of a social worker and a police officer, Harper-Howie watched her parents buy their first McDonald’s franchise location in Los Angeles in 1984. Since then, she and her sister have grown the family business into 24 locations in Los Angeles County.

Harper-Howie says sales growth has declined in every single McDonald’s location they own since the FAST Act went into effect — something that has never occurred in the family’s four decades in the industry.

As a result of lower sales, Harper-Howie says they’ve streamlined job duties for employees and cut about 170,000 labor hours. She hasn’t laid anyone off but just lifted a hiring freeze that was in place for the past year.

“We put (a supervisor) in charge of going to every restaurant and doing a food cost analysis. Are we giving out too many ketchups? Are we putting too much, too many squirts on the Big Mac?” Harper-Howie said.

She also had to increase prices to offset costs. That’s caused employees at neighboring businesses who earn a lower wage to buy less food. Fast food menu prices in California rose by 1.9% relative to the increases in other states over the first six months of the policy, Reich said.

Sales are only now beginning to turn around for Harper-Howie due to a McDonald’s partnership with “The Minecraft Movie” for toys. “The Minecraft Movie” is distributed by Warner Bros. Pictures, a subsidiary of Warner Bros. Discovery, the parent company of CNN.

Harper-Howie said her family will continue the business fueled on hope.

“Not ‘hope’ in like the ‘racetrack hope,’ but hope rooted in the fact that our family has weathered storms for 40 years,” she said. “I do firmly believe in our brand. I love our brand, and so I’m just hopeful that something is going to get better.”

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