Sacramento, California – California’s fast-food industry has seen an obvious drop in employment in recent months, over 3% since the introduction of a new $20 per hour minimum wage for fast-food workers. This development differs from a national rise in similar jobs and raises questions about how wage policies affect labor markets.
Targeting fast-food restaurants with more than 60 locations across the country, Assembly Bill 1228 started the wage rise, which Governor Gavin Newsom pushed in 2023. Chris Thornberg of Beacon Economics LLC claims the timing in relation to the pay increase makes the fast-food industry’s job loss especially troubling since it raises questions about causality.
While fast-food employment is increasing nationwide, industry experts such as Megan Gamble of the California Restaurant Association have noted that California’s numbers are trending the other way.
“The employment numbers for fast-food workers nationwide are up, and the California numbers are down. It’s pretty telling,” said Gamble.
Besides increasing pay, the law created a new state panel tasked with evaluating future wage hikes over $20. Though it has not yet met, this California Department of Industrial Relations commission consists of members from the government as well as the business sector.
The effect of the pay rise goes beyond big businesses to include small business franchisees that run under a brand with over 60 locations and so must follow. Thornberg claims that many small enterprises, which are less able to absorb such shocks, are also impacted by this wide application of the wage rule. He also points out that the data revision including unemployment insurance and other measures showed a significant drop in employment numbers.
Supporters of AB 1228, including the Service Employees International Union, have not yet reacted to the developing statistics. At first, supporters of the bill celebrated the lack of instant job losses following its implementation. But the actual consequences of such regulations could take as long as a year and a half to completely materialize. The new data is barely six months old, and the indicators are not good.
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Although the $20 minimum wage was meant to raise workers’ living conditions, the first signs point to fast-food industry job losses under the regulation, which is important for California’s economy. Economists, legislators, and company owners will all closely monitor the results of this legislation as the state moves forward.