A recent study from the National Bureau of Economic Research (NBER) suggests that California’s minimum wage increase in 2023 may lead to significant job losses in the state. Specifically, researchers determined that the wage hike to $20 for fast food workers, implemented in April 2024, has resulted in a decrease of approximately 18,000 jobs in that sector—this accounts for a 3.2% decline compared to fast food employment trends in the rest of the country.
“Our median estimates indicate 18,000 job losses in California’s fast food sector compared to what would have happened otherwise,” the researchers, Jeffrey Clemens, Olivia Edwards, and Jonathan Meer, noted in their paper.
The California Legislature passed AB 1228 in September 2023, allowing for the establishment of a “fast food council” to oversee the minimum wage for the sector. The bill was later signed into law by Governor Gavin Newsom in April 2024, changing the minimum wage from $16 to $20 per hour.
The specific wording of the bill stated, “The hourly minimum wage for fast food restaurant employees will be $20 per hour, effective April 1, 2024. The council will establish a minimum wage for fast food restaurant employees on an annual basis starting January 1, 2025.”
Since the passage of the bill, job opportunities in California’s fast food industry appear to have shrunk, while fast food jobs in other areas of the country have reportedly increased. The research indicated that employment in California’s fast food sector dropped significantly, with estimates ranging from 2.3% to 3.9%, despite other sectors in the state following national trends.
The study added that prior to the implementation of AB 1228, California’s fast food sector was on a relatively similar trajectory to the rest of the U.S.
Critics of the wage hikes have voiced strong opposition to the findings of this research. In a column for Daily Signals, Rachel Gresler from the Heritage Foundation stated, “History shows that wage management often fails. Policymakers can enact laws, but they can’t control the outcomes.”
Gresler emphasized that the consequences of wage increases in the fast food sector serve as a cautionary tale, especially for cities like Los Angeles. Editorials from the Wall Street Journal have also described the notion that a dramatic minimum wage increase might have positive effects as “magical thinking,” highlighting concerns raised about similar proposals by New York City candidates Andrew Cuomo and Zoran Mamdani.
Cuomo, a moderate candidate, has suggested a $20 minimum wage, while Mamdani, running as a Democratic Socialist, has proposed raising it even further to $30.
In response to the study’s conclusions, Tara Gallegos, Newsom’s Director of Communications, challenged the findings. She indicated that the research linked to the Hoover Institute, which she characterized as a source that had disseminated misleading information regarding California’s wage increases.
Gallegos further referred to an article from the San Francisco Chronicle published in October 2024. This article claimed that forecasts of dire impacts following the signing of AB 1228 had not materialized, insinuating that these pessimistic projections were exaggerated.
Moreover, Gallegos pointed to a study from UC Berkeley, which highlighted that while wages for covered workers increased by 8-9%, there was no discernible negative impact on employment for non-covered workers. Interestingly, fast food establishments in California reportedly grew more quickly than in other regions of the U.S.
Lastly, she noted the average increase in menu prices was only 1.5%, which translates to about 0.06 cents for a $4 burger, indicating minimal cost impact as a result of the wage hike.
