Impact of California Fast Food Worker Wage Increase Still Too Early to Gauge

When Karina Ceballos received her first paycheck reflecting California’s new minimum wage for fast-food workers, she felt a big wave of relief. The single mom said she earned about $400 extra last month, which made it much easier to pay bills and rent for her family’s apartment in Castro Valley.

Ceballos’ fridge is now packed with green vegetables, fresh mangoes and other fruits — healthier foods for her kids that she couldn’t buy much of before, she said, even as she worked more than 60 hours weekly holding two fast food jobs at a Jack in the Box and a TOGO’s.

“I can really feel the change,” said Ceballos, 43, one of the many workers who has marched and advocated for the wage increase in recent years as state lawmakers weighed the issue. “I feel less stressed out. Before, it was really tight financially. Now, I might be able to even save some money.”

About a month after California began requiring most fast food employers to pay their workers at least $20 an hour, as compared to the state’s $16 general minimum wage, economists said it’s still too early to determine the wage hike’s broader impact on the industry, particularly in light of changing inflation rates and other economic trends.

While some fast food workers, like Ceballos, have reported quality-of-life improvements because of the increase, others said they’ve had their hours cut and actually lost income as quick-service restaurants adjust to more expensive payrolls.

Alejandra Aguilar Perez said her employer at a Taco Bell in downtown Los Angeles cut her hours from about full-time to half-time last month, a drastic drop in overall earnings that left her scrambling to support her 7-year-old daughter.

“I’ve been struggling,” said Aguilar Perez, 28, who is now looking for a second job. “It’s hard to pay bills. It’s hard to pay rent.”

Still, Aguilar Perez notes the long lines at the Taco Bell where she works and said she believes the industry will stabilize in the coming months, prompting employers to restore staffing hours.

“The bosses right now are mad,” she said. “But eventually, they are going to have to give in, and they are going to have to give us our hours.”

The majority of California’s roughly half a million fast food workers are women of color, most of whom previously made close to the state’s $16 an hour minimum wage, according to the UC Berkeley Labor Center.

The state law that instituted the $20 hourly minimum wage, which went into effect last month, also created a first-in-the-nation Fast Food Council, made up of worker and employer representatives, that can keep raising the minimum wage by about 3.5% each year through 2029. The law resulted from a compromise between the industry and labor groups and applies only to large chains with more than 60 establishments nationwide.

Most fast food restaurants in the state are franchises, meaning that small business owners pay fees to corporations like McDonald’s to represent their brand. Almost none of the franchisees at the handful of Bay Area fast food restaurants that KQED visited responded to requests for comment.

Brian Hom, who owns two San José Vitality Bowls franchise restaurants that sell acai bowls and salads — and the one franchisee who did respond to KQED — said he does not foresee increasing staff hours any time soon.

To address higher labor costs, Hom, 66, reduced the morning and late afternoon shifts at one of his restaurants from three to two employees and increased menu prices. He sees the new wage requirement as another challenge for his business, which is navigating higher food costs and expensive Silicon Valley rents.

“I’m happy for my employees getting the $20 minimum wage. But they know that if we can’t continue having good sales because of price increases, they may not have a job,” said Hom, a former IBM employee who opened his first restaurant seven years ago. “I’ve talked to my wife. … If things get really bad, we’ll just close the business.”

He won’t know if his sales have dropped until a bookkeeper’s report comes later this month, he said. But some customers have told him that the new prices — including $13.99 for a popular acai, strawberry and banana bowl — are getting too high.

A spokeswoman for the California Restaurant Association, which represents some franchise owners, pointed to recent headlines chronicling higher fast food prices and reduced working hours, which she attributed to the minimum wage increase.

“Feedback from our members suggests this has become a breaking point for many small restaurant businesses,” Megan Gamble, a spokesperson for the association, said in a statement.

However, economist Michael Reich said it’s still too soon to tell how the wage hike will impact employment or menu prices. Reliable data from the U.S. Bureau of Labor Statistics and other sources will start becoming available in about a month, offering more evidence, he said.

More data — as opposed to anecdotal reports — is also needed to determine the cause of fast food industry shifts, Reich said, particularly amid rising inflation rates and as more restaurants use self-order kiosks and other technologies to save on labor costs.

“The cost of food has gone up by 20-something percent in the last three years, so that’s another reason that prices have been going up. It doesn’t mean the minimum wage has caused the price increase,” said Reich, who chairs UC Berkeley’s Center on Wage and Employment Dynamics.

The fast food industry has absorbed past state and local minimum wage hikes by moderately raising prices at levels that didn’t scare customers away, he said. Reich’s research on the impact of California’s previous minimum wage increase found no statistically significant cutbacks in hours or jobs in the fast food industry. But a study he’s conducting on the new fast-food minimum wage could yield different results, he added.

“Fast Food is the biggest user of low-wage workers, and a minimum wage does what it’s intended to do — to raise their living standards. And it does so, at least at the levels we’ve been studying, without causing job loss,” Reich said. “I’ll be very interested to see what happens with $20.”