President Trump criticizes California’s $20 fast food minimum wage

President Donald Trump said Monday that California Governor Gavin Newsom is “putting the minimum wage under siege.”

Trump’s comments at the press conference mcdonalds The Impact Summit was likely a reference to California’s increase in hourly wage caps for fast food workers that went into effect a year and a half ago. But data so far suggests the policy is not as dangerous as President Trump has described it.

Research shows that turnover among fast food workers in the state is decreasing. There have been no widespread closures, and the restaurant chain is still opening locations in California.

To be sure, higher wages are putting added pressure on restaurant chains and operators as other costs rise and eating out becomes less frequent. Additionally, consumers are now paying more for burgers, chicken tenders, and fries due to the new wage floor.

But after a protracted battle over whether raising employee wages would hurt restaurants, critics’ worst fears did not materialize.

Employees at the California fast-food chain, which has more than 60 locations nationwide, will begin earning $20 an hour in April 2024, 25% more than the state’s broader minimum wage of $16 an hour. The sectoral wage floor is part of a larger law passed in California that also creates a council to recommend proposed industry standards to state agencies and has the authority to increase the hourly minimum wage annually.

The breakthrough for fast food workers only came after a compromise was reached between the restaurant industry and unions, ending months of fighting between the two sides. The Service Employees International Union supported the bill, arguing it would improve the lives of workers and increase turnover in the industry. Quick-service restaurants argued they were being unfairly targeted and that the wage increases would put a strain on their operations.

“I strongly believe that everyone is entitled to a fair wage. The problem that I and my colleagues in this industry have is that we as an industry have been targeted,” said Kelly Harper Howie, who along with her sister Nicole Harper Rollins runs the WEH organization and 25 McDonald’s restaurants in Los Angeles County. “If someone works at Macy’s and makes minimum wage, or if they work at CVS…they should be entitled to that wage increase, too.”

California does not support broad minimum wage increases. Last November, just months after the fast food wage floor went into effect, voters in the state rejected a measure that would have raised the statewide minimum wage to $18 an hour. This is reportedly the first time in nearly 30 years that voters have rejected a statewide minimum wage increase on any state’s ballot.

So far, other states have yet to follow California’s lead. The government is monitoring the impact of the law, and the restaurant industry continues to campaign against the law.

By and large, the restaurant industry suffers from razor-thin profit margins. Labor costs are typically the largest cost, and operators often aim to keep labor costs to around 30% of overall costs. In addition to inflation in primary goods and a slump in consumer spending, an increase in the minimum wage poses additional challenges for business owners.

“What I can say without a doubt is that it’s very difficult for restaurants of any concept or size to operate in California right now,” said Sean Kennedy, executive vice president of public affairs for the National Restaurant Association, a major industry group that opposes the wage increases.

In the 17 months since the minimum wage increase went into effect, Harper Howie’s WEH organization has seen a decline in same-store sales. That trend finally reversed in October, when McDonald’s marked the one-year anniversary of the E. coli outbreak that caused company-wide sales to plummet by double digits overnight. The broader burger chain reported same-store sales growth in the third quarter, but its U.S. performance has struggled.

“For a long time, we were just throwing money away,” said Harper Howie, who formed the California Family Business Alliance with fellow McDonald’s franchisees to oppose the California law.

Harper Howie estimates her restaurant has passed on less than 10% of price increases to customers. It will be difficult to raise prices further as the food service industry as a whole, especially for low-income groups, is experiencing a decline in food quality. Additionally, other minimum wage workers who frequent McDonald’s don’t receive similar raises, making food “out of reach for many,” she said.

Harshraj Ghai, which operates more than 200 Burger King, Taco Bell and Popeyes locations in California and Oregon, similarly raised menu prices at its California locations by about 10% to 12%. Mr Guy said this was not enough to offset wage increases.

To further alleviate high costs, Guy has tested artificial intelligence to take orders through drive-throughs, used pre-cooked bacon for breakfast, and introduced automatic batter mixers to reduce labor hours.

“The cost and maintenance of these technologies is starting to get a little bit better than paying someone to actually do it for you,” he says.

Wage increases were just one of the more rapidly escalating costs for franchisees. For example, Harper Howie said that in addition to rising prices for beef and other staples, WEH’s insurance costs are also rising.

The Los Angeles wildfires put added pressure on Harper Howie’s business. One of her stores was temporarily closed, but the bigger blow came from reduced traffic as fires raged across the county, evacuating many residents and scaring off tourists.

President Trump’s hard-line stance on immigration is also an issue.

“Our employees are primarily Latino, and they are scared,” Harper Howie said. “That’s everyone: hourly workers, general managers, shift managers, department managers, supervisors. And that’s our customers.”

Harper Howie said she hasn’t had to close any restaurants yet, thanks to WEH’s inclusion in the McDonald’s system over the decades since her parents joined the McDonald’s franchise in the 1980s.

But that wasn’t the case for Guy, who had to permanently close some of his unprofitable stores. He said he has closed about 10 California stores in the past year and a half and expects to close 12 more in the next year or two. He said closings are common in large restaurant businesses, but in Guy’s case the closures are much more serious than normal.

By the way, Guy only operates Taco Bell restaurants in Oregon, which he said are “significantly more profitable” than the California locations. He didn’t have to close any Taco Bells in Oregon, but he closed at least three in California. Fueled by its perceived value and strong brand equity, Taco Bell significantly outperformed the overall fast food industry last year.

Meanwhile, Kennedy said some franchisors are opting to refranchise California restaurants and collect franchise fees instead of the headache of operating the locations themselves.

Despite rising labor costs, California remains a desirable market for fast food chains. The state added about 2,300 fast-food restaurants from the first quarter of 2024 to the first quarter of 2025, according to data from the Bureau of Labor Statistics. The increase represents a 5% jump, faster than the 2% increase in the rest of the country and higher than California’s 2% increase in the same period last year, according to an analysis by the California Fast Food Workers Union.

While mandatory wage increases pose new challenges for restaurant owners, workers consider it a victory, even if it means fewer regular hours.

For Zane Marte, 28, the increased pay meant he could provide more support to his family and buy his own groceries instead of relying on his parents.

Marte worked at jack in the box I have been in the San Jose area for 7 years. When I first started, I was making $12 an hour. Over time, his salary gradually increased, he received raises, and eventually he was promoted to a management position. Still, his hourly wage was still a few dollars below the new minimum wage until the $20 fast food wage went into effect.

His experience is consistent with research from the Center on Wage and Employment Dynamics at the University of California, Berkeley. Researchers Michael Reich and Dennis Sosinski found that the average pre-policy wage for fast food workers in California was $17.13 an hour, suggesting an average hourly wage increase of about 17% after the $20 minimum goes into effect.

Another report released in April by the University of Kentucky found that hiring for fast food jobs decreased after new salary floors were implemented. However, turnover decreased as higher wages encouraged workers to stay. This reduction in turnover offsets the decline in employment among California’s fast food workers, according to the report.

Historically, turnover has been a big problem for the fast food industry. For operators, hiring and training new workers is expensive and time-consuming.

Marte quit Jack in the Box several months after receiving the raise, saying he was “fed up” with his manager. He then left California and used his college degree to find a job.

Before the minimum wage increase went into effect, one of the concerns of business owners and industry groups was that other restaurants not included in the policy would have to raise wages themselves to remain competitive, but critics said this could be particularly difficult for small businesses. However, those concerns appear to have hardly materialized.

Berkeley’s study found no evidence of spillovers to employee wages at full-service restaurant chains such as Denny’s, Applebee’s, Buffalo Wild Wings, Red Robin and Outback Steakhouse.

More broadly, the University of Kentucky researchers found no evidence that low-wage non-food employers raised wages. With fast-food restaurant hiring slowing, other employers don’t have to worry as much about getting employees into those jobs.

A study by the Shift Project, a partnership between Harvard University and the University of California, San Francisco, found that higher wages did not cause employers to reduce regular work hours or lead to staff shortages in the immediate aftermath of the policy.

However, anecdotally, some fast food restaurants have reduced their hours.

For example, Julia Gonzalez, 21, lives in Los Angeles and works for Pizza Hut and Yoshinoya, Japanese fast-food chains with about 100 stores in California. She told CNBC that although her hours have been reduced, her pay has increased, which means she can save more money. (Mr. Gonzalez is a member of the California Fast Food Workers Union, which supports raising the industry’s minimum wage.)

Harper Howie told CNBC that soaring menu prices have turned away customers, and that the restaurant has cut back on hours throughout the restaurant due to poor sales.

Meanwhile, the number of job losses at fast-food restaurants caused by this policy remains hotly debated.

An analysis of BLS data by the Employment Policy Institute, which opposes minimum wage hikes, found that California has cut about 16,000 jobs at fast food restaurants since Newsom signed the law in September 2024. However, Reich and Sosinski reported that, using employment data adjusted to remove seasonal variation, no related job losses were reported due to California’s warmer climate compared to other regions.

Meanwhile, Newsom, who is widely believed to be the front-runner in the 2028 presidential election, still counts it among his list of policy victories as California governor.

“After raising the minimum wage for workers, California added 750,500 fast food jobs, the most in the state’s history! California’s fast food industry continues to boom every month, and workers can finally get the pay they deserve,” he wrote on X last August.