Effective April 1, 2024, all fast food restaurant employees in California must be paid at least $20 per hour. Before things had barely taken effect, Ingrid Jacques at USA Today was already predicting doom for the new law: massive job losses.
Once actual data was collected and studied, Ingrid Jacques's argument fell apart. The Institute for Research on Labor and Employment (IRLE) at UC Berkeley released a study in October 2024 showing that wasn't the case. The study found that the law and pay hike DID NOT reduce employment.
To qualify as a fast food restaurant, a business must meet specific criteria, including being part of a national chain with at least 60 locations nationwide and serving food primarily for off-premises consumption. The law was written this way so that it wouldn't hinder locally owned small business operations.
One of the other big fears peddled by people and groups who did not want to go along with the pay raise was that business would close and/or fire workers in order to be able to pay the higher wages. The U.S. Bureau of Labor Statistics, however, published numbers of an 11,000 job GAIN in the sector. That small movement, percentage-wise: around 1.5%. So we'll call that a wash. But gaining (or at least maintaining) jobs while increasing wages...well, that seems like a win!
Fox Business also had multiple posts throughout the summer of numerous businesses closing or quotes from business leaders saying that they were going to suspend operations or leave out of state.
Instead, the data shows California has more fast food servers than ever before in their history. Things are not imploding. But that news doesn't get as many clicks or views.
Before the $20/hour fast food minimum wage was enacted, the general minimum wage was $16 an hour. That works out to around $32,250 a year (pre-taxes). With the new law in place as of April 1, 2024, fast food workers making minimum wage received an 18% yearly pay increase. That comes out to $41,600 a year (pre-taxes, of course).
The Wall Street Journal also predicted a "backfire" against the law in July. Supposedly, prices would rise so much that no one would want to pay such expensive prices for fast food. Then businesses would lose money on lost sales. This was 3 months after implementation and we still weren't seeing signs of this coming true.
What the UC Berkeley study showed was that there was an increase in food prices by "a one-time basis only, by about 3.7%," say authors Michael Reich and Denis Sosinskiy. That means is something originally cost $10, it now costs an extra 37 cents for a total of $10.37.
According to all those negative headlines, food costs were supposed to spiral out of control! There was even a debunked viral social media post about $25 Big Macs shortly after the law went into effect.
When UC Berkley crunched the actual numbers, average food costs only rose 3.7%. That works out to about 15 cents added to the average cost of a hamburger. You only pay an extra 15 cents, and a worker gets paid an extra $9,350 a year? Maybe we're crazy, but that doesn't seem like an outrageous tradeoff!
