When California’s groundbreaking law raising fast-food workers’ minimum wage from $15.50 per hour to $20 took effect at the start of the month, food chains including Chipotle, Chick-Fil-A, Pizza Hut and Jack in the Box warned customers to expect higher costs for that go-to burrito or slice.
Those warnings are now materializing: prices for a burger, burrito, or fries at several big fast-food chains have jumped since the new minimum wage was signed into law in September, taking effect on April 1, according to a report by market research firm Datassential. Since September, the state’s prices have risen 7%, leading the nation.
This year, 22 states have raised their minimum wage, affecting nearly 10 million workers. The benefits of a higher minimum wage include helping low-income workers earn enough to live on as inflation drives the cost of living higher all over the country and closing gender, racial and ethnic wage gaps, because people of color are overrepresented among those earning the minimum or less. But better pay is also part of a problem, since businesses need to front higher labor costs on top of rising food prices—and are now shifting that cost onto consumers through price hikes.
Those hikes are many. Chipotle told investors last week that prices at nearly 500 of its California chains increased between 6% and 7% across its menu during the first week of April, compared to the same time last year. At California Chick-fil-A locations, prices have increased by over 10% on average since the start of April, according to research by Gordon Haskett Research Advisors. One Pizza Hut franchisee cited the wage hike as the reason for a preemptive wave of layoffs, in which more than 1,000 delivery drivers will be cut this year across the state.
According to Gordon Haskett’s data, prices at many popular chains in California rose from mid-February to mid-April. Prices at Starbucks, Shake Shack, Chipotle and Taco Bell all jumped by roughly 5% in those two months, while restaurant prices nationwide rose just 0.4%, according to the Bureau of Labor Statistics.
Chipotle, Chick-fil-A, Taco Bell and Shake Shack did not respond to Fortune’s request for comment.
California employs more fast food workers than any other state in the country, according to a Bureau of Labor Statistics report, followed by Texas, Florida and New York. California now offers fast food workers the highest guaranteed base salary in the industry; for all other workers, it also offers one of the highest minimum wages in the country, at $16 per hour.
To be sure, for many minimum wage workers, the pay raises are needed. Of the nearly 10 million workers in the country who are now set to receive raises, women make up over half; nearly a quarter of them, or roughly 2.5 million, are working parents with families; and over 50% of workers getting raises currently earn incomes below the poverty line, according to a report by the Economic Policy Institute.
With a higher minimum wage, government spending on low-income worker benefits like the Supplemental Nutrition Assistance Program (SNAP) and spending on earned income tax credit and child tax credits could drop by billions, according to EPI.
California’s recent legislation has also spurred alarm among other food sectors excluded from the new minimum wage standard, notably the state’s school food service industry. Food service workers historically are some of the lowest-paid employees in public schools, but are now in high demand after California became the first state to offer free meals for all 6.2 million public school students in the state—and the higher wages from fast food jobs are forcing many schools to up their pay.
Last year, Sacramento Unified School District increased wages for its food service workers by 10%, hiking another 6% in July to bring workers to $20 per hour. According to an AP report, it was the district’s largest single raise in nearly three decades. A Southern California school district doubled its food service staff to 40 people after more students were eating school meals, the outlet reported, but other districts, like one in Los Angeles county, found they couldn’t afford to pay their food service workers a comparable wage. A district official told the AP food-service workers could earn up to $25.51 per hour, but would only work three hours per day and be ineligible for health benefits.
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