CA's $20 Minimum Wage For Fast-Food Workers May Have 'Consequences': Report

SANTA CRUZ, CA — The Golden State's fight to increase wages to $20 per hour for fast-food workers was hailed as a huge win for low-earners in 2024 but a new study indicates that victory may have come with some losses.

Researchers at University of California, Santa Cruz found the historic wage increase from $16.90 to $20 per hour for fast-food workers has driven higher menu prices, less hourly work, and more automation that could replace workers, which is detailed in the report released last month.

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The study was released ahead of the 2-year anniversary of the $20 minimum wage going into effect in California in April 2024. AB 1228, a comprehensive labor law supported and signed into law by Newsom in 2023, required fast‑food chains to pay workers at least $20 an hour.

The bill also established the Fast Food Council to boost wages and improve working standards through 2029. Gov. Gavin Newsom said the legislation would help the fast-food industry.

For the study, researchers said they interviewed business owners and managers of more than 100 fast food franchise restaurants throughout California, reviewed the businesses' financial and hiring records, "and observed operations to get a sense for how things have changed" since higher minimum wages were implemented in 2024. They also interviewed owners of three independent restaurants in Santa Cruz to learn the impacts of minimum wage on their daily operations.

“Based on what we’ve found, I think this legislation is a classic case of 'no good deed goes unpunished,'" Stephen Owen, a researcher at UCSC, said in the report. "There are unintended consequences and knock-on effects, and overall, I think the results have definitely not been as positive as policymakers had been expecting."

The report also said it is widely-believed the impacts of the fast food minimum wage increase has made jobs in the fast-food industry "significantly more desirable."

The report notes the researchers' working paper was not a peer-reviewed paper.

California lawmakers have continued to push ahead with wage increases throughout the state since implementing the new minimum wage in 2024. Last year, Mayor Karen Bass mandated airport and hotel workers' hourly wages be increased $2.50 each year until the minimum wage reaches $30 in 2028.

California's minimum wage hike has reverberated across the country; New York City is also currently considering a proposal that would increase the minimum wage to $30, which has been supported by Mayor Zohran Mamdani — a significant jump from NYC's current $17 minimum wage.

"The working poor struggle to get by in California, and that’s a fact," Owen said. "So if we’re serious about helping the working poor, then I think it makes a lot more sense and would ultimately be more effective for the government to focus on other types of policies, such as deregulation to promote business growth and targeted income assistance to families working at or below the poverty line. Freeing businesses from unnecessary regulations would be a much better way for California to empower business growth, leading to increased hiring and higher wages as businesses are allowed to prosper."