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

President Donald Trump said Monday that California Gov. Gavin Newsom is “laying siege to the minimum wage.”

Trump’s statements in McDonald’s The peak of impact likely refers to California’s minimum hourly wage for fast food workers, which took effect a year and a half ago. However, the data so far suggests that the policy did not pose the risk that Trump described.

Research shows that turnover among fast food workers in the state has declined. There have been no widespread closures, and restaurant chains are still opening their locations in California.

The wage increase has certainly put more pressure on restaurant chains and their operators at a time when other costs are rising and dining out is less. Additionally, consumers are paying more for burgers, chicken, and fries as a result of the new minimum wage.

But after a long debate over whether raising workers’ wages would hurt restaurants, critics’ worst fears have not come true.

California fast food workers at chains with more than 60 national locations began earning $20 an hour in April 2024, 25% more than the state’s minimum wage of $16 an hour. The sector minimum wage is part of a larger law passed in California that also creates a council that will recommend proposed industry standards to state agencies and has the authority to raise the hourly minimum wage annually.

The big break for fast food workers came only after a settlement was reached between the restaurant industry and unions, ending months of fighting between the two parties. The Service Employees International Union defended the legislation, saying it would improve workers’ lives and help with industry turnover. The quick-service restaurants said they were being unfairly targeted and that the wage increase would burden their business.

“I firmly believe that every person should be entitled to a fair wage,” said Kerry Harper-Howe, who runs WEH and its 25 McDonald’s locations in Los Angeles County with her sister, Nicole Harper Rollins. “The problem that my colleagues and I in this industry have is that we, as an industry, are being targeted. If someone works at Macy’s and they’re making minimum wage, or they work at CVS… they should also be entitled to this pay increase.”

California did not support a broader minimum wage increase. Last November, just months after the fast-food minimum wage went into effect, state voters shot down a ballot measure that would have raised the statewide minimum wage to $18 an hour. This was reportedly the first time in nearly three decades that voters dropped a statewide minimum wage hike on any ballot in the state.

For now, other states have yet to follow California’s lead, as the state monitors the law’s effects and the restaurant industry continues to lobby against it.

In general, the restaurant industry suffers from very thin profit margins. Labor is usually the largest cost, and operators often aim to keep it at approximately 30% of their total costs. High minimum wages pose another challenge for operators, in addition to commodity inflation and weak consumer spending.

“What we can say without a doubt is that it’s really difficult to operate any restaurant, any concept, any size, in California right now,” said Sean Kennedy, executive vice president of public affairs for the National Restaurant Association, a major trade group that has opposed the wage hike.

For 17 months after the higher minimum wage went into effect, Harper-Howie’s WEH saw same-store sales decline. That trend finally reversed in October, as McDonald’s approached the one-year anniversary of an E. coli outbreak that sent companywide sales down by double digits overnight. The burger chain, more broadly, has seen its performance struggle in the US, although it posted same-store sales growth in the third quarter.

“For a long period of time, we were just bleeding money,” said Harper Hoey, who formed the California Alliance of Family-Owned Businesses with fellow McDonald’s franchisees to respond to the California legislation.

Harper-Howe estimates that its restaurants have passed on price increases of less than 10% to customers. Raising prices will be more difficult amid declining dine-in across the restaurant industry, especially from low-income consumers. In addition, she said other minimum wage workers who frequent McDonald’s did not receive the same wage increase, making the food “unaffordable for many.”

Harshraj Ghai, who operates more than 200 Burger King, Taco Bell, and Popeyes locations across California and Oregon, similarly raised menu prices by about 10% to 12% at California locations. That was not enough to offset the wage increases, Gay said.

To further mitigate rising costs, Guy has been cutting work hours by testing artificial intelligence for drive-thru orders, using pre-cooked bacon for breakfast and adding automatic dough mixers.

“The cost and maintenance of these technologies is now a little better than paying someone to actually do it,” he said.

The wage increase was just another rapidly increasing cost that franchisees were arguing about. For example, Harper-Howie said WEH’s insurance costs have risen dramatically, as well as higher prices for beef and other key ingredients.

The Los Angeles wildfires put further pressure on Harper-Howie’s business. One of its locations was temporarily closed, but the biggest hit came from reduced traffic as fires burned across the county, displacing many residents and scaring away tourists.

Trump’s hardline stance on immigration was another issue.

“Our employees are mostly Latino, and they are terrified,” Harper-Hoy said. “These are all our hourly workers, our general managers, our shift managers, our department managers, our supervisors — they are our customers.”

Harper-Howie said she hasn’t had to close any restaurants yet, thanks to WEH’s contracts in the McDonald’s system after her parents joined the franchise in the 1980s.

But this is not the case for Jay, who had to permanently close some unprofitable sites. He said he has closed about 10 locations in California over the past year and a half, and expects to close 12 more over the next year or two. While closures are a typical part of the large-scale restaurant business, these closures are much more severe than usual for Jay’s, he said.

By comparison, Guy only operates Taco Bell restaurants in Oregon, but those locations are “significantly more profitable” than those in California. He hasn’t had to close any of his Oregon Taco Bells restaurants, but he has closed at least three in California. Taco Bell has broadly outperformed the broader fast food industry over the past year, thanks to its value perception and strong brand equity.

Meanwhile, some franchisees are choosing to re-franchise their restaurants in California, collecting franchise fees rather than the hassle of running the locations themselves, Kennedy said.

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

While the mandatory wage increase represents another challenge for restaurant operators, workers view it as a win, even if it means reducing scheduled work hours.

For Zane Marty, 28, the higher salary meant he could provide more support for his family and buy some of his own groceries, rather than relying on his parents.

Marty worked for Jack in the box In the San Jose area for seven years. When he started working, he was making $12 an hour. Over time, his salary rose, rising through raises and eventually a promotion to a management position. However, until the $20 fast food wage went into effect, his hourly wage was still several dollars less than the new minimum wage.

His experience aligns with research conducted by the UC Berkeley Center on Wage and Employment Dynamics. Researchers Michael Reich and Dennis Sosinski found that the average pre-policy wage for fast food workers in California was $17.13 per hour, suggesting that the average hourly wage increase after the $20 minimum took effect was about 17%.

A separate report from the University of Kentucky published in April found that employment in fast food jobs declined after the new minimum wage was implemented. However, turnover shrank as higher wages encouraged workers to stay. This decrease in turnover offset the slowdown in hiring of fast food workers in California, according to the report.

Historically, turnover has been a major issue for the fast food industry. Hiring and training new workers is expensive and time consuming for operators.

For his part, Marty left Jack in the Box months after receiving the raise after saying he was “tired” of his boss. He has since left California and found work using his college degree.

Before the higher minimum wages went into effect, one concern of operators and trade groups was that other restaurants not included in the policy would have to raise their wages to remain competitive — which critics said could be especially difficult for small businesses. But this fear appears to have been largely unrealized.

The Berkeley study found no evidence of a spillover effect on wages for workers at full-service restaurant chains such as Denny’s, Applebee’s, Buffalo Wild Wings, Red Robin, and Outback Steakhouse.

More broadly, researchers from the University of Kentucky found no evidence that other low-wage non-food employers raised their wages. The slowdown in fast food hiring meant that other employers didn’t have to worry as much about their workers leaving those jobs.

Research by the Shift Project, a partnership between Harvard University and the University of California San Francisco, found that wage increases did not lead employers to reduce scheduled work hours or lead to staff shortages in the immediate aftermath of the policy.

However, accounts indicate that some fast food restaurants have reduced their operating hours.

For example, Julia Gonzalez, 21, lives in Los Angeles and works at Pizza Hut and Yoshinoya, a Japanese fast-food chain with nearly 100 locations in California. She told CNBC that she was scheduled to work fewer hours, but the pay increase still meant she was able to save more money. (Gonzalez is affiliated with the California Fast Food Workers Union, which has been an advocate for raising the industry’s minimum wage.)

Harper Howe also told CNBC that its restaurants have reduced overall hours due to declining sales, as higher menu prices have turned away diners.

Meanwhile, the number of job losses in fast food due to this policy is still hotly debated.

An analysis of Bureau of Labor Statistics data by the Employment Policy Institute, which opposes minimum wage increases, found that nearly 16,000 fast food jobs have been eliminated in California since Newsom signed the law in September 2024. However, Reich and Sosinski reported no relevant job losses using employment data that was adjusted to remove seasonal fluctuations, citing California’s milder climate than the rest of the country.

For his part, Newsom, widely believed to be the front-runner for the 2028 presidential election, still lists his political win as governor of California.

“After raising the minimum wage for workers, California now has 750,500 fast food jobs — the most in the state’s history! California’s fast food industry continues to boom every month as workers are finally getting the wages they deserve,” he wrote in a post on X in August of last year.