No, California's $20 Minimum Wage for Fast-Food Workers Did Not Create Jobs

A University of California, Berkeley, study trumpeted in the media doesn't say what the press release claims.

By Aaron Brown of Reason. Excerpts:

"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. It offers no numbers and no models. There's no evidence that fast-food jobs increased after the law was implemented."

"Only toward the end of the 25-page study is employment shown. There you'll find a graph that represents the closest thing to an argument in the paper. It shows full-service and fast-food restaurant employment in California, represented by the red line, and in the U.S., represented by the blue line, from 2023 to 2024."

"The authors state that the data are prone to sampling errors, and make an inconclusive finding that "we do not detect evidence of an adverse employment effect." 

"But the solid red line on the chart clearly shows California fast-food employment increasing more slowly than the solid blue line showing national fast-food employment, which is the opposite of the authors' claim. If they suggest anything, these data show that the minimum wage increase reduced California fast-food jobs."

"the chart ends in July 2024, when California fast-food employment was up 1.85 percent since March 2024 while national fast food was up 3.22 percent."

"In 2021 and 2022, national and California fast-food employment grew at nearly identical rates: 7.7 percent over the two years nationally, and 7.8 percent in California. But in 2024, growth slowed dramatically in California, and after July, employment began to decline."

"The slowdown started a couple of months before the law took effect, but that's exactly what you'd expect because it was signed by the governor in September 2023 and management's decisions to close, open, or rebrand their restaurants would have been made in anticipation of the law being implemented."

"Every quarter, California employers submit a series of reports to the state giving details of each employee's hours and pay by Social Security number. The state knows everyone who worked for a fast-food operation covered by the law, and what their wages and hours were before and after the law took effect."

"If minimum wage increases were a drug, governments would have to conduct trials and monitor adverse effects afterward. That's what happened in Seattle when it raised the minimum wage in 2014. The city called for proposals to study the impact on actual workers earning below the minimum before the law. The Evans School of Public Policy and Governance at the University of Washington was the only volunteer. Its researchers found that the law didn't cause an increase in layoffs among workers who had previously earned below minimum wage, but it did reduce their hours by an average of 7 percent. That was partly offset by a 3 percent increase in hourly pay for the hours they did work. On net, the law cost these workers an average of $888 per year."

"workers who benefited from higher pay were the ones most likely to have risen out of the minimum wage ranks to the middle class even without a mandated increase, while the workers who lost much more than $888 per year are more likely to be the ones blocked forever from economic advancement. In fact, the paper found that the workers who benefitted net were the most experienced and highest paid among the group–earning more than the old minimum but less than the new–while the less-experienced workers earning the old minimum or close to it, lost considerably more than the average.

Seattle legislators must have been unhappy with those findings because they cut funding for the Evans School and reached out to the same group at U.C. Berkeley that did the California minimum wage study to do its own distorted analysis"