California’s decision to elevate the fast-food minimum wage to $20 per hour was heralded as a significant advancement for labor rights, yet a recent study suggests a substantial drawback: the loss of thousands of jobs in a state confronting persistent economic difficulties.
In September 2023, the California Legislature enacted Assembly Bill 1228, which established the Fast Food Council and increased the minimum wage for fast-food employees from $16 to $20 per hour. Governor Gavin Newsom signed the measure into law and it took effect on April 1, 2024. A new study by the National Bureau of Economic Research (NBER) determined that this policy resulted in the loss of 18,000 jobs in the fast-food sector, reflecting a 3.2% decline compared to a national increase of 0.1%.
The NBER researchers, Jeffrey Clemens, Olivia Edwards, and Jonathan Meer stated, “Following AB 1228’s enactment, employment in the fast food sector in California fell substantially, with estimates ranging from 2.3 to 3.9 percent across specifications, even as employment in other sectors of the California economy tracked national trends.”
A separate analysis by the Berkeley Research Group reported a loss of 10,700 fast-food jobs between June 2023 and June 2024, marking, as the California Globe described, the sector’s most challenging year outside of a recession or the COVID-19 pandemic. Fast-food establishments raised menu prices by 14.5%, twice the national average, and increasingly adopted automated kiosks and kitchen systems to mitigate rising labor costs.
In June 2024, Rubio’s Coastal Grill, a prominent West Coast chain, shuttered 48 California locations, attributing the closures to escalating operational expenses. Jot Condie, president and chief executive officer of the California Restaurant Association, remarked, “Daily headlines have chronicled job losses, reduced working hours, restaurant closures and higher prices for California’s inflation-weary consumers as a direct result of this minimum wage hike. Feedback from our members suggests this has become a breaking point for many small restaurant businesses.”
This policy has sparked a broader ideological debate. Governor Newsom’s administration emphasizes the benefits to workers and the reduction of income disparities. Tara Gallegos, deputy director of communications for Newsom, refuted claims of adverse effects, asserting they stem from politically motivated sources. She cited a University of California, Berkeley study indicating wage increases of 8% to 9% for affected workers, with no negative impact on employment. “The number of fast-food establishments grew faster in California than in the rest of the U.S.,” Gallegos added.
Conversely, critics, including the NBER researchers, contend that wage controls disrupt labor markets, disproportionately affecting low-skill workers. Rachel Greszler of The Heritage Foundation noted that the study’s findings highlight significant job losses among teenagers, young adults, and less-educated workers, and highlighted that minimum wage increases frequently harm the very individuals they aim to assist. The Wall Street Journal also critiqued comparable proposals, such as New York City mayoral candidate Zohran Mamdani’s advocacy for a $30 minimum wage.
The consequences of this wage increase raise concerns about future policies, notably Los Angeles’ proposed $30 minimum wage for hotel and airport workers by 2028. As California navigates the balance between enhancing worker welfare and maintaining economic stability, the ongoing debate underscores the complexity of such reforms.
California’s $20 minimum wage hike for fast-food workers, intended to uplift low-wage earners, has ignited a fierce debate over its economic consequences, with the loss of thousands of jobs pitted against gains in worker earnings. As the state grapples with these trade-offs, the evidence—ranging from the NBER’s reported 18,000 job losses to UC Berkeley’s findings of employment stability—underscores the complexity of wage policy reforms. With Los Angeles’ proposed $30 minimum wage for hotel and airport workers looming by 2028, policymakers face a critical challenge: balancing the pursuit of economic equity with the risk of unintended setbacks for the state’s workforce.