The Californer - "California's Fast-Food Minimum Wage Is a Win-Win-Win, Research Says"

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Oct 3, 2024

"California's $20 Fast-Food Minimum Wage Is a Win-Win-Win, Research Says"

What you need to know: UC Berkeley economists' study shows that raising the minimum wage increased incomes for workers, with no job cuts and food prices remaining largely stable.

SACRAMENTO – A new study published by UC Berkeley's Institute for Research and Labor Employment confirmed that California's $20 minimum wage for fast-food workers has led to significant benefits for workers, without the devastating consequences that critics predicted. The study found that while wages have risen substantially, there has been no reduction in employment in the fast-food sector. Below are some key takeaways from the research:

Wages increased by 18% – For 90 percent of non-managerial workers, wages increased by 18 percent, representing a meaningful bump for workers who have historically been underpaid despite many being the primary breadwinners in their families.
No job cuts – The wage increase did not lead to job cuts, despite what critics had said would be a doomsday for the industry.
Profit margins were already high – The industry had been benefiting from "monopsonistic (higher than competitive) profit margins" which have "absorbed a substantial share of the cost increase."
15 cents – The cost of menu options rose by only 3.7 percent, which is roughly just 15 cents for a typical $4 hamburger.

"This study reaffirms that our commitment to fair wages for fast-food workers is not only lifting up working families but also strengthening our economy. The data shows that investing in workers benefits everyone — workers, businesses, and our state as a whole."

Governor Gavin Newsom

Here are some of the news stories that covered this study:

In July, California set a record for the most fast food jobs in state history. Since the law went into effect in April, the state has gained 7,400 fast food jobs.

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This study comes after corporate restaurant industry groups pushed out "fake" numbers to make it seem like thousands had been fired because of the wage increase.

IN CASE YOU MISSED IT:

New Study Analyzes Impact of California's $20 Minimum Wage for Fast Food Workers

Sectoral Wage-Setting Policy Yields Higher Pay, No Changes in Job Numbers and Modest Price Increases

Berkeley, CA – A new study from the Center on Wage and Employment Dynamics at UC Berkeley offers a careful analysis of the effects of California's recent minimum wage increase for fast food workers. The policy, which took effect in April 2024 and raised the minimum wage to $20 per hour, marks a significant shift in wage regulation. The study, released as California's Fast Food Council considers further wage increases in 2025, presents compelling evidence that the $20 hourly wage has significantly raised worker earnings without job losses or concerning price hikes.

Sectoral Wage-Setting in California leverages novel data on wages and prices at individual restaurants, including over 11,000 reported salaries on Glassdoor. The menu price data come from over 1,500 California restaurants and a similar number in states without recent wage increases. This approach enables the authors to isolate the causal effects of the wage policy from broader market trends.

Key Findings:

18% Pay Increase: The new wage policy raised average hourly pay by 18 percent, lifting the earnings of workers in large fast food chains, 90 percent of whom previously earned below $20 per hour.
Stable Employment: Contrary to fears expressed by restaurant groups, the wage increase did not lead to job cuts. Employment levels remained steady across the fast food industry.
Modest Price Increases: Prices of popular menu items rose by 3.7 percent, translating to an increase of just 15 cents for a typical $4 hamburger.

Consistent with recent minimum wage research, the findings challenge the outdated assumption that significant wage increases lead to job loss. "We find that a carefully implemented sectoral wage floor can raise worker pay without reducing the number of jobs or substantial consumer cost burdens," says report co-author and Berkeley economics professor Michael Reich.

California's sectoral wage policy experiment is both large-scale and groundbreaking. If deemed successful, it could pave the way for similar policies in other states and industries. Indeed, California is already preparing to roll out a second sectoral wage policy for health care workers. This study, the first to marshal systematic data and rigorous analysis, provides policymakers with a timely, evidence-based assessment of the policy's effects on wages, employment, and prices.

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To discuss the report findings in greater detail and answer questions about the research methodology, findings, and policy implications, the authors will host a virtual press briefing tomorrow, October 1. Details below. Read the full report.

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