California fast-food minimum wage hike didn’t cost jobs, study finds

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California’s new $20 minimum wage law for fast-food workers, effective April 1, 2024, raised wages without causing major price increases or job losses, according to a study by the Institute University of California Berkeley for Research on Labor and Employment.

Using an analysis of more than 35,000 Glassdoor job postings, menu prices from nearly 1,600 restaurants, and Bureau of Labor Statistics (BLS) employment data, the results were compelling: The average hourly wage for workers in in fast food grew by 18%, however employment levels remained. stable.

The study contradicts the common belief that higher wages would require job cuts. The policy change resulted in a modest price increase of about 3.7 percent for menu items, translating to an additional 15 cents for a $4 burger.

However, the increase is significantly lower than industry forecasts, suggesting that many fast-food chains have absorbed the costs rather than passing them on to consumers, the study said. The price hike is likely to have boosted restaurant revenue, in part because fast food is “price inelastic.”

A separate study published earlier this year found that fast-food chains in California actually raised prices by 7 percent in the six months leading up to the wage increase.

The new wage standard, believed to be the highest in the country, affects about 750,000 workers, about 90 percent of whom previously earned less than $20. While such an increase might normally raise concerns about job cuts, recent research indicates that the policy has not led to job cuts in the sector. However, Pizza Hut ( YUM ) and several other chains said they would lay off workers earlier this year.

While the study highlights that raising the wage floor can lead to better pay without jeopardizing jobs, challenging the traditional narrative of raising the minimum wage remains difficult, in part because states have their own standards to consider. As the California Fast Food Council moves forward with future wage considerations, the success of this policy could serve as a model for other states looking to improve working conditions while maintaining employment stability.

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