Nov 15, 2024
This year California dramatically raised its minimum wage for fast food workers from $16 to $20 an hour, the largest single minimum wage increase a state government has ever implemented. Enacted in April, this new law only applies to restaurants that are part of a chain of at least 60 establishments nationwide.
For advocates, it’s a long-overdue step to help workers cope with the state’s notoriously high cost of living. The average home value in California is $771,057, more than twice the national average, per Zillow. Gas, grocery and other everyday costs also top national averages.
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But critics are pouncing on new analysis of the increase that they believe underestimates the impacts on restaurants, employees and consumers.
A separate ballot initiative called Proposition 32 aims to increase the state minimum wage to $18 an hour over several years and was recently deemed too close to call. Counting will continue until early December.
Berkeley’s analysis
A recent analysis by UC Berkeley’s Institute for Research and Labor Employment concluded the economic impact of a $20 minimum wage is not as severe as critics warned. They found that while average pay of non-managerial fast food workers rose by nearly 18%, it didn't result in job cuts. Fast food prices rose by about 3.7%, or about 15 cents for a $4 item. The study did acknowledge that since consumers absorbed about 62% of the cost increases, "restaurant profit margins likely fell and the royalty fees restaurant operators pay to franchisors likely increased." However, the authors said restaurant profit margins were "above competitive levels before the policy."
"In July, California set a record for the most fast food jobs in state history. Since the law went into effect in April, the state has gained 7,400 fast food jobs," said a press release from Governor Gavin Newsom's office that said the study reaffirmed that the law is helping and not hurting the local economy.
It's noteworthy that the Shift Project — a joint project between the Harvard Kennedy School’s Malcolm Wiener Center for Social Policy and the University of California, San Francisco — also found that the minimum wage hike had no unintended consequences for staffing, scheduling, or fringe benefits.
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Critics say researchers biased and wrong
The Employment Policies Institute (EPI) has been vocal in attacking the study’s methodology. The conservative think tank released a new policy brief that they say "systematically debunks arguments" in Berkeley's report. One of its key takeaways is that "IRLE’s claim that price increases have merely been 'modest' relies on data from just two weeks prior and two weeks after the minimum wage hike took effect on April 1, 2024. However, research reviewing from when the bill passed in September 2023 to its implementation in April 2024 found California’s fast food menu prices rose over 10%."
“The $20 minimum wage has thrown a wrecking ball into the state’s fast food industry,” said Rebekah Paxton, research director at EPI. “Studies like this from UC-Berkeley use taxpayer funds to present a skewed economic landscape and mislead workers. The public is feeling the negative impacts of this law, and it’s time the government and Fast Food Council listen to workers before plowing ahead with additional wage increases in 2025.”
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Chris Clark is a Kansas City–based freelance contributor for Moneywise, where he writes about the real financial choices facing everyday Americans—from saving for retirement to navigating housing and debt.
