After 2 years and 20,000 jobs, California’s fast food wage hike is a failure

It’s been two years since Gavin Newsom signed the so-called FAST Recovery Act, creating a $20 minimum wage for fast food workers. Instead of a raise, the best data shows these workers lost hours or their jobs. The governor owes them an apology.

At a celebratory bill signing on September 28th two years ago, Newsom was all smiles, calling the law a win-win-win that would leave restaurants, workers, and consumers better off. Under the law, the state’s minimum wage for fast-food workers would rise rapidly to $20 an hour, while a new regulatory council could consider future hikes and institute other mandates.

The party ended quickly. Starting that fall, a wave of media reports showed that restaurants were raising menu prices, cutting staff, and turning to automation to get ready for the law’s implementation in the spring. The state made national headlines when two pizza franchisees laid off more than 1,200 delivery drivers to reduce costs, and restaurants like Foster’s Freeze and Mod Pizza announced they would close locations entirely.

One trade group, the California Business and Industrial Alliance (CABIA), took out a full-page mock-obituary in the newspaper for all of the closed businesses.

The governor and his allies attempted to dismiss these examples as corporate propaganda, but the government statistics back up the stories. Quarterly data representing most California businesses shows the fast food industry shed nearly 20,000 jobs since Newsom signed the wage hike into law. These losses outpace other California industries and the rest of the country’s fast food restaurants, and are unmistakably linked to the timing of the $20 wage mandate.

For those workers that still have jobs, more data shows they are working fewer hours than before. An Employment Policies Institute analysis of Census Bureau data reveals the median fast food worker in California lost up to seven weeks of work after the $20 wage hike went into place, compared to the year before the law. Put differently, even though these fast food workers are earning more per hour, they might be taking home less money.

And workers aren’t the only ones paying the prices; consumers are feeling the pinch, too. Menu price data collected by Datassential shows California’s fast food prices increased more than 13% after April 2024, roughly double the increases in other parts of the country. More double-digit price increases were reported by analysis conducted by University of Richmond and University of Michigan economists.

Perhaps unsurprisingly, in 2024 California voters rejected a minimum wage ballot initiative for the first time in state history, having received an unpleasant preview of the consequences at their local fast-food restaurants.

For a time, Newsom’s press office attempted to push back on claims that his law was a failure,  cherry-picking jobs numbers based on less-robust sample sizes. (In an amusing turn of events, the governor’s preferred data now show undeniable employment declines.) The governor leaned on deeply-flawed reports from a union-aligned labor researcher at UC-Berkeley, while ignoring the conclusive government data and detailed studies from the National Bureau of Economic Research. Today, Newsom’s defenses have become less frequent, with denial of job losses looking as silly as a flat earth conspiracy.

Sadly, the state’s large localities don’t seem to be paying attention. In Los Angeles, a forthcoming $30 hotel minimum wage is already causing havoc for the city’s hospitality businesses, causing some projects to be canceled and other hotels to pull out of the Olympic room block. Government data show the city’s hotel industry has been stagnating since its previous hike up to $22.50. Further south in San Diego, the City Council just passed a similar ordinance, and is about to learn a lesson in unintended consequences.

Historically, California has been proud of the entrepreneurial achievements of its residents. Today, it’s determined to be a cautionary tale, showing other states a clear example of what bad public policy looks like.

Michael Saltsman is executive director and Rebekah Paxton is research director of the Employment Policies Institute. Saltsman serves on the board of CABIA.