CA fast-food worker wage increase will begin in 2024. Here's how it'll affect you

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Tuesday, December 12, 2023
How CA fast-food worker wage boost in 2024 will affect you
California workers at most fast-food chains will make $20 an hour starting on April 1, 2024. Economists explain how much more you may have to pay following the increase.

SAN FRANCISCO (KGO) -- California workers at most fast-food chains with more than 60 locations will make $20 an hour starting on April 1, 2024. It's a new state law and economists say it will affect you.

"Higher prices but that's not all," said David Neumark who is the Chancellor's Professor at the University of California, Irvine.

"Most certainly there is going to have to be some price increase," said David Smith who is an economics professor at Pepperdine University.

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"It's definitely the case that prices will increase; what is surprising is that they're not going to increase nearly as much as a lot of the commentators like to think," said Professor Orley Ashenfelter who specializes in economics at Princeton University.

So the question is, how much more will you pay when you go to eat fast-food in California?

We asked three economists. Professors from elite university's across the country. Including Professor Ashenfelter who studied minimum wage increases at McDonald's and published his results in 2021.

"If the wage goes up by 10 percent the price goes up by two percent," said Professor Ashenfelter. "This is not a projection, this is based on the facts on the history. Historically when minimum wages go up, about 20 percent of the increase is passed through in prices. That's the way it's been for decades."

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McDonald's and Chipotle both announced earlier this year that prices will go up in California when this takes effect, but they haven't said by how much.

For example, let's say the wage that they are paying a worker at a fast-food restaurant goes from $15.50 to $20. That is nearly a 30 percent increase. Professor Ashenfelter says you'd pay a six percent increase on that. So your seven-dollar Big Mac would then be $7.42. But we could see more than just price increases.

"Some estimates suggest that we could have up to 50,000 jobs lost in the state of California," said Professor Smith.

"You might have longer lines, you might have dirtier dirty restaurants, there is even a study from Seattle when they raised the minimum wage hygiene violations increased, but consumer prices is also one potential route," said Professor Neumark.

What makes the increase easier for businesses, is that all the chains will raise their prices, and in some cases, consumers could look to smaller restaurants that are unaffected by the new law.

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