In April 2024, California implemented the FAST Act, which increased the minimum wage for fast-food workers from $16 to $20 per hour. Firms reduced hours, limited hiring, and substituted capital for labor.—callmatters.org
The Questions
- What is FAST Act and what does it do?
- How has FAST Act changed the quantity of labor demanded in California’s fast-food labor market?
- How has FAST Act changed the quantity of labor supplied in California’s fast-food labor market?
- Why are fast-food firms substituting capital for labor?
- What has happened to unemployment in California’s fast-food labor market?
The Answers
- What is FAST Act and what does it do?
FAST Act is a minimum wage law that increased the minimum wage for eligible fast-food workers in major fast-food chains in California from $16 to $20 per hour, meaning firms cannot legally pay below $20.
- How has FAST Act changed the quantity of labor hours demanded in California’s fast-food labor market?
FAST Act has decreased the quantity of labor hours demanded. At Burger King franchises, average hours per day decreased from 61 in October 2023 to 53 in October 2025 (approximately from 8 to 6–7 full-time workers per day, assuming an 8-hour workday), and at McDonald’s in the Central Valley, annual working hours fell by 128,740 hours (approximately about 62 full-time workers).
- How has FAST Act changed the quantity of labor hours supplied in California’s fast-food labor market?
Higher wages attract workers into the industry, increasing the quantity of labor supplied. The number of applicants to Burger King franchises increased from 4,999 in April 2023 to 21,112 in September 2025.
- Why are fast-food firms substituting capital for labor?
The price of labor has increased relative to the price of capital. So, firms are substituting capital for labor. Taco Bell in Santa Cruz replaced workers with kiosks, Burger King in the Bay Area and Taco Bell replaced workers with AI in drive-throughs, and Chipotle and Sweetgreen replaced workers with robots and automated kitchens.
- What has happened to unemployment in the fast-food labor market?
Unemployment is the excess of the quantity of labor supplied over the quantity of labor demanded at the minimum wage. Higher wages widened this gap as franchises reduced working hours and hiring, while also attracting more workers, as shown by the increase in applications.
Now take a short quiz to ensure you understand what you just read.