California’s New ‘Fast Food’ Wage Law Will Probably End Badly. We Just Don’t Know How.

Workers fill food orders at a Chipotle restaurant on April 1, 2024, in San Rafael, California. (Photo by Justin Sullivan/Getty Images)

Among the many benefits of America’s federal system is that states can experiment with different policies and learn from others’ successes and failures to formulate better policies of their own. When it comes to economics, arguably no place generates more such experiments—and more such failures—than the lab in Sacramento. This time, it’s the state’s new minimum wage law, which went into effect on Monday (April Fool’s Day, naturally) and mandates a 25 percent increase—from $16 to $20 per hour—in the base pay for employees of qualifying “fast food restaurants” (i.e., chain restaurants with counter service and more than 60 nationwide establishments). Even before the law went into effect, it was mired in controversy because it excluded restaurants with in-house bakeries—a narrow category that appeared to apply to only Panera Bread, a major franchisee of which is a close associate of (and big donor to) California Gov. Gavin Newsom. The Panera exclusion has since been repudiated by everybody, including the governor, the franchisee—which says it will pay the new $20 rate—and the state’s new “fast food council,” which the law established to set wages and conditions at fast food restaurants. (What could go wrong?!) 

The exemption’s mysterious genesis remains comically interesting, but for today’s purposes it’s the law’s economic effects that we’ll scrutinize. And if the latest research and headlines are any indication, PaneraGate might be the law’s high water mark.

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