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California’s $20 Minimum Wage: More Applicants, Fewer Jobs

EconEye Admin

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

  1. What is FAST Act and what does it do?
  2. How has FAST Act changed the quantity of labor demanded in California’s fast-food labor market?
  3. How has FAST Act changed the quantity of labor supplied in California’s fast-food labor market?
  4. Why are fast-food firms substituting capital for labor?
  5. What has happened to unemployment in California’s fast-food labor market?

The Answers

  1. 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.

  1. 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).

  1. 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.

  1. 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.

  1. 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.

Answer the following questions to check your understanding of the story.

FAST Act, which raises the minimum wage for fast-food workers in California, is an example of which type of government intervention?

Wrong! - A price ceiling sets a maximum, not a minimum price. A production quota limits quantity, not wages. A subsidy is a government payment, not a wage law.

Perfect! - A minimum wage is a price floor in the labor market.

A rise in the minimum wage led fast-food firms in California to reduce working hours. How is this change represented in the labor market?

Wrong! - Workers supply labor. Firms demand it. A change in the wage rate doesn’t change labor demand and labor supply.

Well Done! - Higher wages cause a movement up along the labor demand curve, decreasing the quantity of labor demanded.

Following FAST Act, applications for fast-food jobs or labor hours supplied increase significantly. How is this change represented in the labor market?

Wrong! - Firms demand labor hours. Workers supply it. A change in the wage rate doesn’t change labor demand and labor supply.

Good Job! - Higher wages cause a movement up along the labor supply curve, increasing the quantity of labor supplied.

Fast-food firms in California replaced workers with kiosks, AI drive-throughs, and automated kitchens. How is this change represented in the labor market?

Demand for labor hours __________; quantity of labor hours demanded __________.

Wrong! - Capital adoption here is a response to higher wages, so it changes the quantity of labor hours demanded, not labor demand.

That's Right! - Capital is adopted in response to a higher wage rate decreasing the quantity of labor hours demanded without changing labor demand.

How has the unemployment changed after FAST Act?

Unemployment has __________ because _________.

Wrong! - A fall from QD1 to QD2 shows a decrease in employment, not unemployment. A rise from QS1 to QS2 shows an increase in the number of applicants, not unemployment. At $20, the gap between QD and QS higher than at $16.

Correct! - The gap between QS and QD is larger at $20 than at $16.

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