No, California’s $20 Minimum Wage for Fast-Food Workers Did Not Create Jobs
After California’s $20 minimum wage for fast-food workers went into effect in April, some economists expected affected restaurants to cut jobs. So what actually happened? They not only added workers but did so at a faster pace than fast-food restaurants in the nation as a whole—or at least that was the claim of a research paper by two labor economists at the University of California, Berkeley, and the University of California, Davis.
If you actually read it, you’ll find that the results celebrated in the press release and echoed by the media aren’t in the paper. In fact, it barely addresses the effect of the minimum wage increase on fast-food employment in California. It offers no numbers and no models. There’s no evidence that fast-food jobs increased after the law was implemented.
The paper’s findings were trumpeted as evidence that government-mandated wage increases have no adverse effect and that we should be raising the minimum wage higher and in more places.
Only toward the end of the 25-page study is employment shown. There you’ll find a graph that represents the closest thing to an argument in the paper. It shows full-service and fast-food restaurant employment in California, represented by the red line, and in the U.S., represented by the blue line, from 2023 to 2024.
The authors state that the data are prone to sampling errors, and make an inconclusive finding that “we do not detect evidence of an adverse employment effect.” But the paper’s abstract neglected the fine print caution, boldly asserting, “We find that the policy…did not reduce employment.” The accompanying press release, which is likely all that journalists bothered to read, states that “contrary to fears expressed by restaurant groups, the wage increase did not lead to job cuts.”
But the solid red line on the chart clearly shows California fast-food employment increasing more slowly than the solid blue line showing national fast-food employment, which is the opposite of the authors’ claim. If they suggest anything, these data show that the minimum wage increase reduced California fast-food jobs.
But it’s still hard to make a precise estimate from the way the chart is presented. So I looked up the numbers, which tell a different story than the authors claim. Even though the paper was published in September, the chart ends in July 2024, when California fast-food employment was up 1.85 percent since March 2024 while national fast food was up 3.22 percent.
This is a sign that the minimum wage is having a negative impact. In 2021 and 2022, national and California fast-food employment grew at nearly identical rates: 7.7 percent over the two years nationally, and 7.8 percent in California. But in 2024, growth slowed dramatically in California, and after July, employment began to decline.
The slowdown started a couple of months before the law took effect, but that’s exactly what you’d expect because it was signed by the governor in September 2023 and management’s decisions to close, open, or rebrand their restaurants would have been made in anticipation of the law being implemented.
But there’s a big problem even with my version of the chart. The data used to draw the red solid line don’t only represent fast-food restaurants impacted by the law; they also include casual dining restaurants exempted from the law, such as buffets, Panera Breads, smaller fast-food chains, donut and snack shops, grocery store concessions, and most delis. If fast-food restaurants were negatively impacted by the law, we would expect some of the exempted establishments to expand to take their market share, thus adding jobs. By combining data from exempted establishments that were likely growing with data from restaurants impacted by the minimum wage increase, the negative effect of the law may be hidden in the data.
Looking at crude aggregates tells us little. But California possesses the information from employer job reports that would settle the issue. Every quarter, California employers submit a series of reports to the state giving details of each employee’s hours and pay by Social Security number. The state knows everyone who worked for a fast-food operation covered by the law, and what their wages and hours were before and after the law took effect.
Another study on the same subject, “Early Effects of California’s $20 Fast Food Minimum Wage” by Daniel Schneider, Kristen Harknett, and Kevin Bruey, sponsored by Harvard’s Malcolm Wiener Center for Social Policy, used data from semi-annual surveys of retail workers in Western states. In this case, the researchers focused only on fast-food workers covered by the law, excluding exempt restaurants.
Immediately after the new fast-food law became effective, California fast-food workers los
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