President Donald Trump said Monday that California Gov. Gavin Newsom is “laying siege on the minimum wage,” a jab aimed at the state’s higher pay floor for fast-food workers. But the evidence since the policy took effect suggests the fallout Trump warned about hasn’t materialized in the way critics predicted.
California’s fast-food minimum wage — $20 an hour for workers at chains with more than 60 national locations — began in April 2024. That rate is about 25% higher than the state’s general minimum wage of $16. The increase came as part of a broader law that also created a fast-food council empowered to recommend industry standards and raise the sector’s wage annually.
The law followed months of intense conflict between restaurant groups and labor advocates. The Service Employees International Union backed the measure, saying it would raise living standards and reduce the industry’s notoriously high turnover. Fast-food operators argued the sector was being singled out and that the jump in labor costs would force closures and cut jobs.
So far, those worst-case scenarios haven’t shown up at scale. Research indicates turnover in the fast-food sector has declined, and California hasn’t seen widespread shutdowns across major chains. Instead, restaurants have continued to open locations, even as operators acknowledge the new wage has added strain during a period of rising costs and softer consumer demand.
At the same time, the higher wage floor has pushed menu prices up, meaning customers are paying more for common items like burgers, chicken, and fries. Operators say they’ve had few alternatives in a business where labor is usually the largest expense and margins are thin.
Franchisees feel the squeeze
Restaurant owners say the wage hike arrived alongside other financial pressures — from food inflation to climbing insurance costs to an overall pullback in dining, particularly among low-income customers.
“What we can say without a doubt is that it’s really tough to operate any restaurant, any concept, any size, in California right now,” said Sean Kennedy, executive vice president of public affairs at the National Restaurant Association, a vocal opponent of the wage law.
Kerri Harper-Howie, who oversees WEH Organization’s 25 McDonald’s locations in Los Angeles County with her sister, said her business has struggled since the change. Her stores saw same-store sales fall for about 17 months after the wage kicked in. Sales only began improving in October, around the one-year mark after an E. coli outbreak hurt McDonald’s performance nationally. Even then, she described the period as financially punishing.
“For a long period of time, we were just bleeding money,” Harper-Howie said. She helped form the California Alliance of Family Owned Businesses with other McDonald’s franchisees to push back against the legislation.
WEH raised prices by less than 10%, Harper-Howie estimated. She said larger increases would be risky when customers are already cutting back. She also argued that many minimum-wage workers outside fast food did not receive the same boost, making meals harder to afford for some of McDonald’s core customers.
Harshraj Ghai, who operates more than 200 Burger King, Taco Bell, and Popeyes locations across California and Oregon, said he lifted prices roughly 10% to 12% in California, but that still hasn’t matched the higher wage bill. To control costs, Ghai has reduced labor hours and tested automation — including AI for drive-thru ordering, pre-cooked breakfast items, and automated kitchen tools — arguing that tech is starting to rival the cost of additional staff.
The pressures haven’t been purely economic. Harper-Howie said Los Angeles wildfires hurt traffic, temporarily closing one of her stores and reducing tourism and local footfall. She also said Trump’s immigration crackdown has rattled a workforce she describes as overwhelmingly Latino.
“Our employees are predominantly Latino, and they’re terrified,” she said, adding that the fear extends from hourly staff to managers — and affects customers as well.
Harper-Howie has not closed any restaurants yet, crediting WEH’s long history in the McDonald’s system since the 1980s. Ghai, however, said he has permanently closed around 10 California locations over the last year and a half and expects more closures ahead. He characterized closures as normal in a large portfolio — but said the pace in California is unusually high compared with Oregon, where he hasn’t shut any Taco Bells and reported stronger profitability.
Kennedy also noted that some major franchisors are choosing to refranchise California locations, preferring franchise fees over direct operational headaches.
Even with these struggles, California remains attractive for big chains. The state added nearly 2,300 fast-food restaurants between the first quarter of 2024 and the first quarter of 2025, according to Bureau of Labor Statistics data, reflecting a roughly 5% increase — faster than national growth over the same period.
Workers say the raise matters
For employees, the pay hike has been a major gain, even where hours have tightened.
Zane Marte, 28, said the $20 floor helped him contribute more to family expenses and buy groceries without relying on his parents. He spent seven years at Jack in the Box in the San Jose area, starting at $12 an hour and eventually reaching management. Even then, he remained below the new minimum until the policy took effect.
His story tracks with research from UC Berkeley’s Center on Wage and Employment Dynamics. Economists Michael Reich and Denis Sosinskiy found the average pre-policy fast-food wage was $17.13 an hour, implying an average pay increase of about 17% once the $20 floor arrived.
A University of Kentucky study released in April found hiring slowed after the wage hike, but turnover fell as workers stayed longer — a shift that partly offset lower hiring. Since turnover is a costly routine problem for fast-food operators, researchers argue the retention benefit matters.
Marte ultimately left Jack in the Box after conflicts with his manager, moved out of California, and found work using his college degree.
Before the law began, critics warned that restaurants outside the covered fast-food chains would have to boost wages to compete, potentially harming small businesses. Berkeley researchers did not find evidence of significant wage spillover into full-service chains such as Denny’s, Applebee’s, Buffalo Wild Wings, Red Robin, or Outback Steakhouse. The Kentucky study similarly found little sign that other low-wage employers had to raise pay to avoid losing staff, likely because fast-food hiring cooled.
Research from the Shift Project — a Harvard–UCSF partnership — also found no immediate broad cuts in scheduled hours or widespread understaffing after the wage took effect. Still, some workers say hours have tightened in practice. Julia Gonzalez, 21, who works at Pizza Hut and Yoshinoya in Los Angeles, said she’s been scheduled less but still comes out ahead because of the higher hourly rate.
Harper-Howie likewise said she reduced total labor hours due to weak sales and higher menu prices.
The job impact remains fiercely contested. The Employment Policies Institute, which opposes minimum-wage increases, estimated about 16,000 fast-food jobs have disappeared since Newsom signed the law in September 2024. Reich and Sosinskiy dispute that conclusion, saying seasonally adjusted employment data show no meaningful job losses tied to the new wage.
Newsom continues to tout the policy as a success, pointing to record fast-food employment in the state and arguing that the industry is expanding while workers finally see higher pay.
For now, other states are watching closely. California’s model hasn’t been widely copied, and the national restaurant lobby is still working to block similar moves elsewhere. But early outcomes suggest the law has reshaped the industry’s economics without triggering the broad collapse many opponents predicted.
