Minimum wage increase in California to $20 results in loss of 18,000 jobs, research indicates

California's fast food sector has experienced a shift following the implementation of AB 1228, a law that raised the minimum wage for fast food workers to $20 per hour. The National Bureau of Economic Research (NBER) published a study in September 2023, shedding light on the potential impact of this wage increase.

According to the NBER study, the fast-food sector in California has lost approximately 18,000 jobs since the wage hike went into effect in April 2024. This represents a 3.2% decline in the sector compared to fast-food sectors in other parts of the country. However, it's important to note that the study does not specify the author of the paper.

Tara Gallegos, Newsom's deputy director of communications, has disputed these findings, claiming that the Hoover Institution, which published the study, has a history of publishing false or misleading information. Gallegos also cited a study from a UC Berkeley professor, which found that covered workers saw wage increases of 8 to 9%, with no negative wage or employment effects on non-covered workers.

Interestingly, the study also found no negative effects on fast-food employment and that the number of fast-food establishments grew faster in California than in the rest of the US. These findings seem to defy the doom-and-gloom predictions made when Gov. Gavin Newsom signed AB1228 back in September 2023, as stated in a San Francisco Chronicle article from October 2024.

Prior to AB 1228 going into effect, California's fast-food sector was on a similar path as the rest of the United States. The study looked at fast-food sector data from when the bill was enacted in April 2024 up until mid-December 2024.

The study also found that menu prices increased by an average of 1.5%, equivalent to about $0.06 cents on a $4 hamburger. Rachel Greszler, an economic expert at The Heritage Foundation, wrote that wage controls do not work and the consequences of California's fast food minimum wage hike should serve as a warning sign for cities like Los Angeles.

The Wall Street Journal editorial board has criticized the notion that a substantial minimum wage hike helps the economy. They have criticized New York City mayoral candidates Andrew Cuomo and Zohran Mamdani for proposing similar wage hikes.

In conclusion, the NBER study suggests a potential loss of jobs in California's fast food sector following the minimum wage hike, while other studies present conflicting findings. The ongoing debate underscores the complexity of minimum wage policies and their potential impact on employment and costs.

Minimum wage increase in California to $20 results in loss of 18,000 jobs, research indicates