Newsom’s $20/Hr. Fast-Food Minimum Wage Law Backfires

Two years after California Governor Gavin Newsom signed the FAST Recovery Act with cameras flashing and union leaders cheering, the law is leaving a trail of layoffs, shuttered restaurants, and angry consumers.

The measure, which took effect in 2023, mandated a $20 minimum wage for fast-food workers across the state. Newsom hailed it at the time as a “win-win-win” for employees, restaurant owners, and customers. But the numbers now show a far different reality.

According to the Employment Policies Institute (EPI), California has shed nearly 20,000 fast-food jobs since the law was signed — accounting for almost one-quarter of all fast-food job losses nationwide over the same period. The analysis draws from Bureau of Labor Statistics data, which paint a bleak picture for one of California’s largest entry-level job sectors.

The job losses are not just statistics. Two major Pizza Hut franchisees recently laid off more than 1,200 delivery drivers, citing the steep rise in labor costs. Other chains, including Mod Pizza and Foster’s Freeze, have decided to close California locations altogether. For many small-business franchisees, razor-thin margins disappeared overnight once payroll costs spiked.

Even those who still have jobs are losing out. EPI estimates non-tipped restaurant workers have seen their hours slashed by an average of 250 annually — the equivalent of $4,000 in lost income under the state’s previous minimum wage. Many part-time employees are being replaced by kiosks and self-ordering technology as owners race to offset the higher costs.

“Newsom’s $20 wage has turned out to be nothing more than a boost to his own ego at the expense of fast-food workers,” said EPI research director Rebekah Paxton. “His consistent claim that the law is a ‘win’ is out of touch with reality, and lawmakers looking to mirror his job-crushing policies should think twice.”

The pain has spread beyond workers. Consumers are paying more, too. Menu price data from Datassential show fast-food prices in California climbed more than 13% after April 2024, nearly double the average increase in the rest of the country. Families already stretched by inflation now face higher bills for basic meals.

Small businesses are suffering the most. The American Cornerstone Institute warned that unlike global corporations, mom-and-pop shops cannot absorb the higher payroll expenses, leaving them with two choices: cut staff or close down. “In the same manner, a state-wide minimum wage doesn’t make sense when applied uniformly across a state as big as California,” the group said, pointing out that the cost of living in San Francisco is vastly different from rural regions like the Central Valley.

The fallout has fueled criticism of Newsom’s leadership. Opponents argue he ignored basic economic warnings in order to deliver a political win for organized labor.

“This should be a wake-up call for Newsom and other policymakers pushing for drastic wage hikes that will cause unintended consequences,” Paxton said.

Supporters of the law point to a UC-Berkeley study claiming that the wage hike did not reduce employment and only increased prices modestly, by about 2%. But business groups and workers on the ground say the Berkeley study ignores the closures, layoffs, and lost hours happening in real time.

For many Californians, the issue has become symbolic of a broader disconnect between Newsom’s progressive rhetoric and economic reality. While the governor has not addressed the latest round of data directly, critics note his silence is telling. “His office isn’t responding because the numbers speak for themselves,” one franchisee said.

The political stakes are high. Newsom has been floated as a potential future Democratic presidential contender. But policies like the FAST Recovery Act, which were sold as national models, are now being cited as cautionary tales of overreach.

“California was the test case, and it failed,” said one Republican strategist. “If Democrats try to scale this nationwide, the result will be disaster for workers and consumers alike.”

For now, the damage in California is measurable: tens of thousands of jobs lost, hours cut, restaurants shuttered, and menu prices climbing faster than anywhere else in the country. What was once celebrated as a bold experiment is now widely seen — even by many of the workers it was supposed to help — as a self-inflicted wound.