CA's $20 Fast-Food Minimum Wage Didn't Lead To Job Cuts, Studies Find

CALIFORNIA — Despite warnings from powerful fast-food conglomerates and business advocates, a California law that raised wages for fast-food workers in April has not led to job losses, according to two new studies and federal data.

Corporations and industry partners had urged that raising the minimum wage to $20 for fast-food workers would lead to dramatic price hikes and massive job cuts. According to a study from the University of Berkeley, California — neither of those things occurred.

What the study did find was that employment levels remained steady across the industry and that workers saw an 18% raise in pay. It also found that the prices of popular menu items rose by 3.7% — an increase of about 15 cents for a $4 hamburger.

"We find that a carefully implemented sectoral wage floor can raise worker pay without reducing the number of jobs or substantial consumer cost burdens," said report co-author and Berkeley economics professor Michael Reich.

The law applied only to chains with at least 60 locations nationwide. In California, there are around 750,000 workers in the fast food sector, many of which were earning less than $20 per hour — around $17 per hour on average — before April 1, when the law was enacted, according to Glassdoor.

Despite the steep overnight wage increase for swaths of workers, the state has added 7,400 jobs to the fast-food industry since the law took effect, according to a report from the federal Bureau of Labor Statistics.

That figure contradicts a full-page advertisement placed in USA Today by the California Business and Industrial Alliance on Oct. 2. The ad claimed that nearly 10,000 fast-food jobs were cut since Gov. Gavin Newsom signed the law mandating that minimum wages for such workers rise from $16 to $20.

But jobs for fast-food restaurants were climbing months before Newsom signed the bill in September, according to federal data and multiple reports.

"The data shows that investing in workers benefits everyone — workers, businesses, and our state as a whole," Newsom said.

Another project also affirmed findings from the federal agency and UC Berkeley. The joint study from the Harvard Kennedy School and UC San Francisco found "no evidence that wage increases had unintended consequences on staffing, scheduling or wage theft."

What's more, levels of understaffing "appeared to ease," according to the study.

The findings dashed claims from opponents of the law, who said that the increase could result in a reduction in hours or fringe benefits.

"In response to wage increases, California fast food employers could have looked to cut costs by reducing fringe benefits such as health or dental insurance, paid sick time, or retirement benefits. We find no evidence of reductions in any of 7 types of fringe benefits in response to the California fast food wage increase," researchers wrote.

According to Reich, a co-author on the UC Berkeley study, he's received criticism from food industry professionals and a member of the state's Fast Food Council, the San Francisco Chronicle reported. A website run by the Employment Policies Institute, which was cited in the Oct. 2 USA Today ad, boasts entirely different statistics and claims that employment numbers fell as a result of the wage hike.

The Employment Policies Institute made its predictions before the law took effect: "A majority of restaurants say they have already raised menu prices" and "Many (75%) say the number of employees will decrease."

But Reich told the Chronicle that he isn't worried about any of that.

"I haven't seen anything that makes me doubt our study."

Recent findings could be consequential to how voters decide on Proposition 32, which aims to increase the state's minimum wage to $18 an hour.

Like California's fast-food wage hike, the measure is opposed by business advocates like CalChamber.

“If Proposition 32 is passed, Californians will see higher costs, fewer jobs and a reduction of available work hours for employees in the state,” said CalChamber President and CEO Jennifer Barrera. “Voters need to reject this proposal because it will contribute to inflation, add to the high cost of living in California, and hurt state revenues. It will put even more pressure on our state budget.”

If the proposition passes, businesses with more than 26 employees would need to pay $18 an hour or more starting Jan. 1, 2025. Businesses with 25 or fewer employees would need to pay at least $17 an hour in 2025 and $18 an hour by 2026.

California would have the highest minimum wage of any state in the country if the measure passes.

But wealthy investor and anti-poverty advocate Joe Sanberg who helped author the Living Wage Act of 2022 says the current minimum wage is not high sufficient for living in one of the nation's most expensive states.

“Many working Californians, including essential workers, parents and seniors, have full-time jobs yet struggle to make ends meet. The minimum wage has not kept pace with the cost of living and is worth less today than it was 50 years ago,” reads the text of the Living Wage Act.

To comfortably support two children in California, workers would need to make $50 an hour to get by, which would translate to roughly $104,000 a year. A SmartAsset study used the MIT Living Wage Calculator and found that to live comfortably in a major city in California, a single person would need to make about $96,500 a year, and a family of four would need to make at least $235,000 to avoid living paycheck to paycheck.

READ MORE: CA Proposition 32: California's Minimum Wage Hike Measure Explained