Governor Gavin Newsom (D) signed Assembly Bill (AB) 1228 in September of 2023 that forced fast food companies like McDonalds and Starbucks to pay their CA employees a minimum of $20 an hour, $4 more than the state minimum wage of $16 and hour.
The bill is also responsible for creating something that no other state has done, a fast-food council. The council falls under the already existing branch of the CA Department of Industrial Relations (DIR) and consists of nine voting members: two representatives from fast food corporations, two franchise owners, two workers from restaurants, two employee advocates and one member of the public. The council also has two non-voting members, a biz representative and a DIR representative. Here is a full list of the council and their members that is headed by Chairman Nick Hardeman, a long-standing figure in CA politics who has served as Chief of Staff to CA Senate President Pro Tempore Emeritus Toni G. Atkins.
For many people who do not follow labor politics, which is the majority of people, this substantial raise seemingly comes out of nowhere. I promise you, however, that this is not the result of a generous CA State Assembly who love and respect their local baristas. This is the result of a hard-fought battle between organized labor and capital.
How AB 1228 Came to Be
The officially titled Fast Food Accountability and Standards Recovery Act did not manifest out of thin air. This was the result of organized strikes and lobbied CA officials. One of the main groups is Fight for $15, whose origins started the way back in 2012 when two hundred fast food workers walked off in New York. “Today we are a global movement in over 300 cities on six continents,” according to their website. They have organized over 400 strikes for fast-food workers since 2020, one of the major reasons CA food workers now make $20 an hour.
The bill was first introduced to the California State Assembly in February of 2023 and went through four different committees in both the Senate and the Assembly. It was not passed and signed into law until September of last year, and once it was, it was met with immediate pushback.
The group “Save Local Restaurants” led a campaign to put the bill on the 2024 November ballot as a veto referendum. According to Ballotpedia, restaurant corporations like Starbucks, Wendy’s, and Chick-fil-A supported the group and organizations like the McDonald’s Corporation Political Action Committee funded it. As of right now, the veto referendum is not set to be on the ballot in November.
Why $20 is Not Enough
It’s no secret that California has always been one of the more expensive states to live in. Since the pandemic, though, the cost of living has skyrocketed. In an article published in CalMatters.org, the cost of housing in California used to be three times the average household income. Today, that number is “more than seven times” what your average household is bringing in.
The average rent in California is around $1,800 per month, and that’s just housing. The Bureau of Economic Analysis found in 2021 that the average cost of living in California is $53,082 a year. On a wage of $20 an hour, working full time, an individual worker would make $41,600, and that’s before taxes.
People in California would need to make closer to $27 an hour just to afford to live in the state, and that number is based on being a single person with no kids. The chart above shows how much a person would need to make if they have a partner and/or kids. Keep in mind that these numbers are just to get by. They are not calculated with the 50/30/20 budgeting rule in mind (50% toward needs like food, housing, transportation, 30% toward wants, and 20% toward savings.
According to a Smart Assess study published this year, the average single Californian would need to make closer to $90,000 a year just to be comfortable. A family of four would need more than double that, needing $235,000 a year to be comfortable. When you take these numbers into account, it’s no wonder that California has the largest homeless population in the country.
It’s worth noting, also, that when the word “comfortable” is being thrown around regarding individual American finances like this, this is usually in reference to the 50/30/20 budgeting rule, which was designed to be the floor regarding finance and budgeting, not the ceiling. The discourse about individual finance and the numbers thrown around referring to how much Americans need to earn to “get by,” in reality, means living paycheck to paycheck, never having any savings or means to climb the economic ladder.
Reactions and Going Forward
A lot of people seem to be upset that fast food workers are making $20 an hour, and with this comes the normal rhetoric surrounding any action that benefits workers: a higher minimum wage hurts the economy, hours will be cut, jobs will be lost, prices will go up, and consumers will suffer.
One article published in the Wall Street Journal cites all these reasons. They even entitled the article “California’s Crazy ‘Fast Food’ Minimum Wage Takes Effect” with the subheadline reading “A Burger King franchise will have to pay burger flippers $20 an hour. The corner diner won’t.”
A clip of Fox News Host Jesse Watters on a podcast also went viral for his tone-deaf comments on the CA wage increase where he said “If you’re making $20 an hour to work at a fast food restaurant, alright. Is that six figures?” For those who can do math, they will know that a full time CA fast food worker makes not even half that, but Watters doubled down and continued saying “That job doesn’t really require much.”
Moreover, the claims that big corporations like McDonald’s and Starbucks make that an increase in wages means an increase in prices and a reduction of the work force may not be true.
The Roosevelt Institute, a non-profit think tank, student network, and partner of the Franklin D. Roosevelt Presidential Library, published contrary findings in late March of this year.
They concluded “that increasing the minimum wage for California’s fast-food workers can offset the real wage decline caused by the brief inflationary period of 2022-2023 and that the industry’s operating profit margins provide sufficient room to absorb wage costs.”
Others, however, see the wage increase as a positive thing. When Congress passed the Equal Employment Act of 1946, there were two different committees created to analyze the state of the economy so we could have a plan for how best to improve it. One of those committees was the Joint Economic Committee (JEC).
In December of 2022, the committee published an article explaining that a competitive labor market is essential for the health of the American economy. Competitive wages in one sector incentivizes another to pay their workers more or risk losing their labor force. Increasing the minimum wage for fast food workers does just that.
Starting in June of this year, California healthcare workers’ minimum wage is going to be raised to $25 an hour, a bill that Newsom signed just a month after the fast-food bill. Last year, the United Auto Workers union secured a new contract with major auto companies for a significant raise along with the rail workers too. Maybe with all these raises, other sectors might fight for higher wages too.
