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-Editorial
A new study released by the National Bureau of Economic Research (NBER) suggests that California’s $20 minimum wage for fast food workers, enacted through Assembly Bill 1228, led to a measurable decline in sector employment. The law, passed in September 2023 and implemented in April 2024, applied to limited-service restaurants operating at least 60 locations nationwide—targeting major fast-food chains.
“California is home to more than 500,000 fast-food workers who – for decades – have been fighting for higher wages and better working conditions,” Governor Gavin Newsom said back in 2023 when the wage increase became official. “Today, we take one step closer to fairer wages, safer and healthier working conditions, and better training by giving hardworking fast-food workers a stronger voice and seat at the table.”
According to economists Jeffrey Clemens (UC San Diego), Olivia Edwards, and Jonathan Meer (Texas A&M University), California’s fast food employment declined between 2.3% and 3.9% from September 2023 to September 2024, relative to national trends. Their median estimate indicates a loss of about 18,000 jobs that would have existed in the absence of the policy.
The researchers used data from the U.S. Bureau of Labor Statistics’ Quarterly Census of Employment and Wages (QCEW), analyzing employment trends before and after the wage increase. Even after accounting for seasonality and pre-existing growth trends, the study consistently showed a notable drop in fast food employment in California compared to the rest of the country.
The paper also notes that the actual wage increase was uneven across the state, as some jurisdictions like Los Angeles and San Francisco already had higher local minimum wages. In addition, many smaller fast food establishments were exempt from AB 1228, since it only applied to chains meeting the 60-location threshold.
The economists compared employment in fast food with that in other industries less affected by minimum wage laws and found minimal impact on California’s broader labor market. However, they observed a smaller employment decline in full-service restaurants, potentially due to competition for similar workers.
Wage increases were substantial. California’s fast food sector saw an 8% average wage increase compared to the rest of the U.S., reinforcing that AB 1228 achieved its goal of boosting pay. But the trade-off appeared to be employment: both traditional difference-in-differences analysis and more complex triple-difference models confirmed the job losses.
While some earlier studies using alternative data sources (such as payroll or CES data) had suggested minimal employment impact, Clemens and his co-authors argue that their use of comprehensive, administrative data provides more robust evidence of the law’s consequences.
The authors caution that these findings reflect short-run outcomes and that long-term effects, such as changes in business models, prices, or workforce automation, remain to be seen. They also note that AB 1228’s design, targeting a single industry with one of the largest one-time wage hikes in U.S. history, makes it a particularly valuable case study in labor market policy.