California Fast Food Wage Law Starting to Impact Entire Nation, Potentially Delay Fed Rate Cuts

A new California law mandating a $20 minimum wage for fast-food workers is causing shockwaves far beyond the Golden State’s burger joints and taco shops, according to a new report from Bloomberg.

The impact of the wage hike, which took effect on April 1, is spiraling outward to affect millions of low-wage workers across the state and potentially the nation.

Michaela Mendelsohn, owner of six El Pollo Loco restaurants, has already been forced to boost managers’ salaries by over 10% to more than $83,000 annually. “They’ve gotten a big pay increase,” Mendelsohn said of her managers, who previously made just over $70,000 a year.

Governor Gavin Newsom claimed the law would raise pay for 500,000 low-income workers, but that estimate now appears vastly understated.

As many as 5 million of California’s low-wage workers, both in fast food and adjacent industries, could see their earnings rise according to analysis by Bloomberg Economics. That equates to approximately 3% of the entire U.S. workforce given California’s massive population.

These pay increases are likely to have national economic ramifications, potentially boosting labor costs and adding pressure on the Federal Reserve to maintain higher interest rates for longer.

The higher wages are already spreading beyond fast food to other low-wage sectors.

Joseph Bryant, an SEIU executive who championed the law, said “The floor has been lifted. Lower-wage workers across the board are saying, ‘We deserve the same.'” For example, school cafeteria workers in Sacramento will soon earn $20 per hour, driven in part by competition with restaurant workers.

RELATED: California Fast Food Law Forcing Franchisees to Automate Everything, Eliminate Employees

However, the unprecedented raises are coming at a cost.

Some fast-food employees are reporting reduced hours, and companies are scrambling to boost productivity with measures like AI ordering systems. Prices are also rising, with some chains hiking menu costs 5-8%.

Restaurant owners and executives are begrudgingly adapting to the $20 wage, but worry about the unknown repercussions for businesses throughout the state.

“This is just so extraordinary, with the repercussions of what might happen to businesses small and medium-size, up and down the state of California, unknown,” said McDonald’s franchisee Scott Rodrick.

The fast-food wage increase was entirely foreseeable, and the costly disruptions it is triggering should come as no surprise.

California’s experiment with a $20 minimum wage for low-skilled work will undoubtedly cause economic chaos and fuel further inflation as the effects cascade through supply chains statewide and beyond.

READ NEXT” California Bill Would Force Landlords to Accept Pets, But That’s Not the Worst Part

Only time will tell the full extent of the damage.