California's Fast-Food Minimum Wage Hike Is Killing Jobs
You can’t legislate your way to prosperity.
In 2023, California adopted a law that raised the minimum wage to $20 per hour. It also created a Fast Food Council with the power to further increase wages by dictate every year. Twenty bucks an hour is a nice, round number which is probably why state lawmakers picked it—though it's not clear why they stopped there. After all, if you're going to create prosperity by command, why not shoot for the moon and make all the Golden State's fry cooks millionaires? But it's just as well that they didn't go further—that hike to $20 per hour is killing jobs as it is.
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One Law Kills 18,000 Jobs
"On April 1, 2024, California raised its minimum wage from $16 to $20 per hour for fast-food workers employed at chains with more than 60 locations nationwide," Jeffrey Clemens, Olivia Edwards, and Jonathan Meer write in a National Bureau of Economic Research working paper that was first addressed by Reason's Peter Suderman in the November print issue. "Our median estimate suggests that California lost about 18,000 jobs that could have been retained if AB 1228 had not been passed."
The authors initially calculate that "employment in California's fast-food sector declined by 2.7 percent between September 2023 and September 2024 relative to fast-food employment elsewhere in the United States." But they make the point that, prior to the passage of A.B. 1228, the bill hiking the minimum wage, fast-food employment was rising faster in the state than elsewhere in the country. Allowing for that, and for changes in the overall labor market, they estimated the real decline in California's fast-food employment at 3.6 percent to arrive at 18,000 lost jobs.
That's a lot of missing opportunities for Californians to get a foothold in the work world, make money, and pay their bills. It also squares with other estimates of the attempt to legislate prosperity.
In September, the Employment Policies Institute (EPI) drew on U.S. Bureau of Labor Statistics data to estimate "15,988 fast food jobs lost since the law went into effect in April 2024." The group added, "California's fast food job loss rate (-3.3% of jobs lost) more than doubled the losses in fast food restaurants nationally (-1.6% of jobs lost) since September 2023."
That EPI memo built on a November 2024 study that found "more than 4,400 California fast food jobs have been lost since January," based on federal data. That study also found "10.1 percent menu price increases by April 2024 since the law's passage in 2023."
A February 2025 paper from the Berkeley Research Group (BRG) found the fast-food sector "lost 10,700 jobs (-1.9%) between June 2023 and June 2024." The researchers added, "this decline sharply contrasts with the sector's historically compounded annual growth rate of 2.5% and marks the only December year-over-year decline in fast food employment this century–excluding the Great Recession (2009) and the COVID-19 pandemic (2020)." That report also found that "menu prices at California's fast food restaurants increased by 14.5% between September 2023 (the month AB 1228 was signed into law) and October 2024, nearly double the national average (8.2%)."
But Didn't One Study Say the Law Did No Harm?
Not every look at the minimum wage hike has been negative. In particular, the Institute for Research on Labor and Employment (IRLE) at the University of California-Berkeley concluded the minimum wage hike "did not affect employment adversely" and only slightly increased prices for consumers.
But as New York University statistics instructor Aaron Brown pointed out for Reason, "you'll find that the results celebrated in the press release and echoed by the media aren't in the paper. In fact, it barely addresses the effect of the minimum wage increase on fast-food employment in California." Additionally, Brown noted, IRLE's data showed California fast-food employment lagging national employment. And, confusingly, IRLE didn't separate out fast-food employment; the researchers included fast-food restaurants with casual-dining restaurants, buffets, and delis, some of which might have picked up customers and hired new workers to meet demand as prices rose at fast-food restaurants.
A Big Boost for Robots
It should be obvious by now that using the law to forcibly raise the price of something reduces demand for that thing and can raise other prices down the line. That's true as much for labor as it is for milk or steel. In terms of labor, our high-tech age is making it easier than ever to replace hourly workers with increasingly affordable robots.
"California fast food restaurants also increased automation and technology adoption to offset rising labor costs," the BRG paper also found. "Therefore it should not be surprising that the number of employees per restaurant is declining."
Last year, Don Lee of the Los Angeles Times reported on Harshraj Ghai, an owner of 180 fast-food restaurants across California. The first thing Ghai did after the new minimum wage took effect "was to start capping workers' hours to avoid overtime pay." Lee added that "the biggest thing Ghai and his family are doing does not directly involve workers at all: They've speeded up and expanded their use of technology, especially AI" to replace workers with self-service kiosks and to automate drive-thru ordering.
Technology has come to the back of the house, too. BurgerBots, a burger joint with a largely automated kitchen, opened this year in Los Gatos, California. It showcases technology from ABB Robotics, which hopes to minimize the human role in commercial food preparation.
You Can't Legislate Prosperity
California officials may be grappling with the bad news from the minimum wage hike. The law established a Fast Food Council which has the power to further increase wages every year by the lesser of 3.5 percent or inflation. The council is supposed to hold public meetings "no less than every six months" but the last meeting on the schedule was back in February. The position of chair is currently vacant.
"Fox26 has sent emails to the Department of Industrial Relations asking when the next meeting will be," the news station reported last month. "We started emailing the department back in May and have still not gotten a date for the next meeting."
The truth is that if creating prosperity was as easy as passing another law, we'd all be rich. But laws, more often than not, get in the way of jobs, business, and building wealth. Passing legislation is no substitute for the hard work of hard work. To create prosperity you have to come up with ideas, produce goods and services, match buyers and sellers, and keep everybody reasonably satisfied.
Minimum-wage laws are appealing because they promise to make us richer with no extra effort. Instead, though, they get in the way of the labor and business that really can make us more prosperous.