New Policy Brief Proves California’s $20 Fast Food Wage is Costing Jobs, Raising Prices

UC Berkeley’s Institute for Research on Labor and Employment has been exposed for apparent bias in downplaying the obvious devastating effects of California’s $20 minimum wage on the state’s fast food industry. The $20.00 per hour wage went into effect April 1, 2024.

According to the Employment Policies Institute, the Berkeley IRLE report and an affiliated report from the Shift Project use alternative data sources that minimize the extent of the damage AB 1228 has already caused.

With California voting tomorrow on another statewide minimum wage hike up to $18 per hour, this is more evidence of Governor Newsom and Democrats in the Legislature making policies which cripple businesses.

In July, the Globe reported that fast food franchise owners were already experiencing store closures, layoffs, cutting back on employee hours, or even considering moving out of state. In a survey conducted by the Employment Policies Institute of 200 fast-food companies, 89 percent of those eateries already had been forced to reduce scheduled hours for their employees. The survey also found:

• 98% California fast-food restaurants said they raised menu prices.
• 89% reduced employee hours.
• 73% limited employee shifts or overtime.
• 70% reduced staff or consolidated positions.

These are the labor decisions employers must make to remain solvent in bad economic times. California fast-food restaurant owners said these labor moves will also be in play for future decisions to remain in business.

The Employment Policies Institute just released a new policy brief that systematically debunks arguments in the UC-Berkeley’s Institute for Research on Labor and Employment report. The EPI policy brief presents a multitude of evidence showing the negative impact of California’s $20 fast food minimum wage, right before California votes for another statewide wage hike from $16 to $18 per hour.

According to the Employment Policies Institute:

The UC-Berkeley IRLE report uses convoluted data sources to claim the law has not hurt restaurants, employees or consumers, and uses misleading data that do not represent the restaurant industry or properly measure the impacts of the $20 wage law. The misguided claims run contrary to reports dating back to the fall of 2023 when the law was signed showing businesses began laying off workers, raising menu prices, and limiting worker hours in preparation for the wage hike.

“The $20 minimum wage has thrown a wrecking ball into the state’s fast food industry,” said Rebekah Paxton, research director at EPI. “Studies like this from UC-Berkeley use taxpayer funds to present a skewed economic landscape and mislead workers. The public is feeling the negative impacts of this law, and it’s time the government and Fast Food Council listen to workers before plowing ahead with additional wage increases in 2025.”

EPI said The Berkeley authors “use non-seasonally adjusted numbers to make these assumptions. This method misrepresents the on-the-ground reality.”

“They also claim that California’s trends are not statistically unique, and therefore employment changes cannot be attributed to the new AB 1228 law (pages 11-12). This is false. California’s fast food industry employment has dropped compared to its total and full-service restaurant industry employment (which is not subject to the $20 minimum wage standard). When looking at employment changes from the most recent period (September 2024) since the end of last year, the fast food industry is the only sector that has experienced negative net job loss.”

Instead of acknowledging that “the ones who remain employed will receive higher wage rates, but fewer will be employed,” Gov. Newsom is causing owners of fast food businesses more hardship. This is a well-proven in fact by late economist Milton Friedman.

As the EPI reports on the UC-Berkeley’s labor center, “Despite their home in some of the best public universities in the country, the ‘research’ they produce overwhelmingly supports labor unions and union- friendly lawmakers who support their preferred policies.”

“UC labor centers like the one at UC-Berkeley and UCLA routinely receive funding from unions. Data from the U.S. Department of Labor Office of Labor-Management Standards (OLMS) shows totals given since 2005.3 The Service Employees International Union (SEIU) tops the list with over $673,000 given to UC labor centers – a union that began the “Fight for $15” campaign that has pushed for $15 minimum wage legislation, and now
higher, across the country.”

Key Takeaways:

• IRLE’s claim that price increases have merely been “modest” relies on data from just two weeks prior and two weeks after the minimum wage hike took effect on April 1, 2024.  However, research reviewing from when the bill passed in September 2023 to its implementation in April 2024 found California’s fast food menu prices rose over 10%.
• Seasonally adjusted BLS data shows employment in the fast food industry is down by over 4,400 jobs since January, when businesses began announcing layoffs.
• When looking at employment changes from the most recent period (January-September 2024) since the end of last year, the fast food industry is the only sector that has experienced negative net job loss.
• Neighboring states Oregon and Nevada both experienced net increases in fast food jobs over the same period (January 2024 to the present).
• Early data from the Bureau of Labor Statistics Quarterly Census of Employment of Wages, which IRLE researchers claim is the “best universe” of data on this topic, confirm negative trends in employment for the months right before the law took effect.
• UC-Berkeley’s Institute for Research on Labor and Education (IRLE) is a taxpayer- and union-funded research lab, receiving millions per year in taxpayer dollars and union dollars.
• Previous research from Michael Reich and the IRLE on the impacts of minimum wage hikes has been debunked by other academics and news outlets, including Forbes and Seattle Weekly.

The full policy brief is available here.