# The Effects of California’s $20 Fast-Food Minimum Wage on Prices 

Between 2023 and 2024, California’s minimum wage increase from $16 to $20 per hour for fast-food workers at large chains increased food-away-from-home prices by 3.3–3.6 percent.

August 12, 2026 • Research Briefs in Economic Policy No. 496 

By Jeffrey Clemens, Olivia Edwards, Jonathan Meer, & Joshua D. Nguyen 

In September 2023, the California legislature passed Assembly Bill (AB) 1228, increasing the minimum wage to $20 per hour for fast-food workers employed at chains with more than 60 locations nationwide. The statewide minimum wage was $16 at that time, and the increase for fast-food workers went into effect entirely on April 1, 2024, making it one of the largest one-time minimum wage increases in US history. Although sector-specific minimum wages are attracting renewed attention, California’s is one of the few such increases enacted in recent decades.

Our research examines the effects of AB 1228 on consumer prices using the food-away-from-home (FAFH) component of the Consumer Price Index for All Urban Consumers, produced by the Bureau of Labor Statistics. This series is reported separately for each of 21 large metropolitan statistical areas (MSAs) across the United States, four of which are in California. The FAFH index measures the prices paid by urban consumers, including taxes and tips, for meals and snacks purchased at restaurants and other commercial food service establishments. Fast-food and full-service restaurants together account for over 93 percent of the index.

Our findings reveal that FAFH prices in California’s MSAs began rising gradually relative to other MSAs from the time of the law’s enactment to its implementation, stabilizing roughly six months after implementation. Specifically, prices increased by 3.3–3.6 percent between September 2023 and December 2024 when accounting for local macroeconomic conditions. Our research finds no evidence of a divergence in food-at-home prices or broader price indices (the overall price index and the price index excluding food and energy) between California’s MSAs and other MSAs. Additionally, trends in FAFH prices were similar between MSAs before the law was enacted.

AB 1228’s limited scope likely tempered its effect on restaurant prices. For example, it excludes chains with fewer than 60 locations nationwide, and three cities in our data already had local minimum wages above the initial state level of $16: Los Angeles ($17.24), San Diego ($16.85), and San Francisco ($18.67). More importantly, it excludes full-service restaurants, which constitute 43.1 percent of the FAFH index.

While AB 1228 did not directly impact full-service restaurants, prior research estimates that full-service prices increased by about 43 percent as much as fast-food prices. Several factors could explain this spillover effect, including full-service restaurants raising wages to compete for workers and consumers increasing demand for full-service meals in response to fast-food price increases. In any case, this figure allowed us to estimate the overall price increase for each sector: a 4.9–5.1 percent increase in fast-food prices and a 2.1–2.2 percent increase in full-service prices.

Our calculations indicate that if fast-food restaurants had fully passed through the minimum wage increase to consumers, prices would have risen by 2.4 percent. The larger observed increase implies that additional factors are involved. For example, research has shown that minimum wage increases disproportionately lead to the closure of lower-rated restaurants. If these restaurants also charge the lowest prices, average fast-food prices will rise even if no remaining restaurants raise their prices. Moreover, remaining restaurants may raise prices if competition is reduced. Restaurants may also respond to minimum wage increases by hiring higher-skilled workers, potentially improving service quality and thereby justifying higher prices. Furthermore, research indicates that wage increases drive inflation, prompting firms to increase prices as consumers become less price sensitive.

Additionally, our findings suggest that price increases reduced consumers’ demand for fast food by 3.9–4.1 percent and for full-service meals by 1.7–1.8 percent. These quantity reductions align with employment reductions estimated in prior research: 3.2 percent in the fast-food sector and 2.1 percent in the full-service sector. Overall, our findings paint a picture consistent with competitive low-wage labor markets: a large, sector-specific minimum wage increase raised labor costs, firms passed those costs through to consumers by raising prices, and the resulting decline in demand reduced employment. These price increases also have distributional implications, as lower-income households spend a larger share of their budgets at fast-food restaurants.

**Note** 
This research brief is based on Jeffrey Clemens et al., “[The Effects of California’s $20 Fast Food Minimum Wage on Prices](http://www.nber.org/papers/w34990),” National Bureau of Economic Research Working Paper no. 34990, March 2026.

##### About the Authors 

##### Jeffrey Clemens 

University of California San Diego

##### Olivia Edwards 

Texas A&M University

##### Jonathan Meer 

Texas A&M University

##### Joshua D. Nguyen 

Texas A&M University

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