California’s $20 Fast-Food Minimum Wage: Job Losses, Higher Food Prices, Increased Automation

A new study released today by the Berkeley Research Group proves that California’s $20 minimum wage for fast food workers has led to job losses, higher food prices, and increased automation in the industry.

The BRG study found, “California’s fast-food restaurants lost 10,700 jobs between June 2023 and June 2024, making it the worst performing year outside of a recession, and the COVID-19 pandemic. Additionally, food prices at local restaurants have increased by 14.5% since the legislation was signed, nearly double the national average.

AB 1228 was signed into law in October 2023 by Governor Gavin Newsom, creating the new $20 minimum wage for fast food employees – a massive 25% increase from the $16 minimum wage.

The increase to $20 minimum wage for fast food workers went into effect in April of 2024. The study confirms that Californians are bearing the cost of the 25% wage hike through significant job losses and steep food price hikes for consumers.

Notably, the study reports that advocates for the fast food minimum wage have already branded the 25% increase a success because fast food workers received higher pay because of the increase, and they falsely claim the number of jobs available to these workers has increased. “However, these claims are not supported by reliable data –and are likely wrong,” the study’s authors say. Here is why:

“US Bureau of Labor Statistics (BLS) employment trends in California’s Limited-Service Restaurants sector have significantly weakened in 2024, making it the worst performing year outside of a recession during this century–compelling evidence that the 25% minimum wage increase has reduced the number of jobs available.

The BLS Limited-Service Restaurants and Other Eating Places data covers a broad category of food service establishments, including restaurants that are not directly impacted by the wage increase.Employment gains in non-affected establishments may mask job losses among fast food restaurants subject to the $20 minimum wage.

Higher wages do not guarantee higher total income for workers if employers reduce hours to offset costs–a reduction most economists would expect to occur as fast food restaurants act to reduce costs in the face of the $20 per hour minimum wage. Survey data confirms that nearly all fast food restaurants have already cut, or plan to cut, employee hours, reducing the overall earnings of workers. If these reductions are large enough, workers could end up with less total income, despite the wage increase. Reliable data on hours worked by fast food employees following the AB 1228 implementation date (April 1, 2024)is not yet available.”

The study authors note:

“Economists regularly analyze year-over-year employment trends to account for seasonal fluctuations. If AB 1228 had a favorable impact on employment, as proponents claim, the data should show a larger increase in employment in 2024 than in years without a major minimum wage increase. However, the opposite is true.

Figure 2shows year-over-year employment trends in the “Limited-Service Restaurants and Other Eating Places” sector during the month of December from 2000 to 2024. While the compounded average annual growth rate over this period is 2.5%, from December 2023 to December 2024, employment in this sector shrank by 0.2%. This marks the only year-over-year decline in December employment this century, aside from the Great Recession (2008-2009) and the COVID-19 pandemic (2020).

These findings directly contradict claims that AB 1228 led to job growth and instead indicate a net decline in employment following the wage increase.”

As the Fast Food Council’s Planning Subcommittee prepares to meet next week, the Globe hopes they acknowledge that another wage increase in 2025 could further harm the restaurant industry, as well as the California economy.

Key Findings from the study:

• 10,700 Jobs Lost:According to U.S. Bureau of Labor Statistics (BLS) Quarterly Census of Employment and Wages data, California’s limited-service restaurant lost 10,700 jobs (-1.9%) between June 2023 and June 2024—marking the steepest decline this century outside of the Great Recession (2009) and the COVID-19 pandemic (2020).
• 14.5% Increase in Food Prices:Since the legislation mandating the $20 minimum wage for fast food workers was signed in September 2023, food prices at California’s local restaurants have increased by 14.5%—nearly double the national average (8.2%).
• Technology and Automation Replacing Workers to Offset Increased Labor Costs:Restaurants have accelerated the use of ordering kiosks, AI drive-thru systems, and robotic kitchen automation, reducing available entry-level jobs and shrinking employment per location.

“This report confirms what CABIA has been saying for months,” Tom Manzo, Founder and President of CABIA, the California Business and Industrial Alliance, told the Globe. “The fast food minimum wage has destroyed jobs and threatened small businesses across California. Now, the question is whether the Governor will finally own up to his egregious mistake, or will he continue trying to gaslight his own constituents to save face.”

The findings echo concerns raised by more than 1,000 local restaurant owners, who recently sent a letter to Governor Gavin Newsom and the Fast Food Council, urging them to reject additional wage increases in 2025.

The concerns raised by those 1,000+ local restaurant owners are a powerful testament to the negative impacts of the minimum wage increase.