There’s no such thing as a free fast-food lunch. Last year California super-sized its minimum wage to $20 an hour for employees at big quick-serve restaurant chains, and new research confirms that Sacramento did not repeal the basic laws of economics. According to the study, California only months later had 18,000 fewer fast-food jobs than if the law had never passed.
California’s $20 fast-food wage rule, up from $16, took effect in April 2024 on chains with at least 60 locations nationwide. “This is one of the largest one-time minimum wage increases in United States history,” write three economists at the University of California, San Diego, and Texas A&M, who published their paper in the National Bureau of Economic Research. Analyzing federal data, they find that the law raised wages about 8% “relative to the fast food sector elsewhere in the country.”
On the other hand, by that September, “employment in the fast food sector in California fell substantially, with estimates ranging from 2.3 to 3.9 percent,” the authors say, “even as employment in other sectors of the California economy tracked national trends.” No surprise: When the cost of putting low-skilled fry cooks on the payroll goes up, the number of employment opportunities for fry cooks goes down. The study only measured job losses through September 2024, and Bureau of Labor Statistics data has suggested there may be more losses since.
The economists add a note of caution that their analysis likely understates the negative effects of large minimum-wage increases. For one thing, the California law didn’t apply to fast-food chains with fewer than 60 locations. For another, some cities had higher local wage rules ($17.55 in San Jose), meaning that the true change imposed by the state law was blunted in some areas.
{{/usCountry}}The economists add a note of caution that their analysis likely understates the negative effects of large minimum-wage increases. For one thing, the California law didn’t apply to fast-food chains with fewer than 60 locations. For another, some cities had higher local wage rules ($17.55 in San Jose), meaning that the true change imposed by the state law was blunted in some areas.
{{/usCountry}}The idea that minimum wages decrease employment is far from new, and perhaps to some readers this study sounds like a mundane dog-bites-man story. Yet today’s political debate is full of magical thinking.
The Democratic Party’s socialist nominee for New York mayor, Zohran Mamdani, has called for increasing the city’s minimum wage to $30. Andrew Cuomo, his supposedly more moderate competitor, wants a $20 minimum. These guys will never learn because they don’t want to see the world as it really is.