California's $20 Fast Food Minimum Wage: Researchers Say It Led to "Negative Outcomes" — Here's What the Data Shows
California's $20 Fast Food Minimum Wage: Researchers Say It Led to "Negative Outcomes", Here's What the Data Shows
A pay raise that sounded like a win. The reality is far more complicated.
The Promise That Started It All
Imagine working a double shift at a fast food counter, dealing with the lunch rush, de-escalating angry customers, managing a fryer that's perpetually too hot, and still not making enough to cover rent in one of the most expensive states in America.
That was the reality for hundreds of thousands of California fast food workers. And in 2023, Governor Gavin Newsom signed a bill that was supposed to change that.
Assembly Bill 1228 (AB 1228) took effect statewide in April 2024, requiring large fast-food chains, those with at least 60 locations nationwide, to pay workers at least $20 per hour. For context, that was well above California's general minimum wage of $16.90 per hour at the time.
When Newsom signed it, he said it would bring California "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."
Noble goal. Compelling optics. But now, two years into the experiment, researchers are publishing findings that complicate the victory narrative, significantly.
What the Research Actually Found
Fewer Hours, More Applications, A Painful Paradox
Here's the thing about economics that politicians sometimes forget: when you raise the price of something, even labor, demand for it tends to fall.
A UC Santa Cruz research team led by Economics Lecturer Stephen Owen set out to test exactly that. They interviewed business owners and managers representing more than 100 fast-food franchise restaurants across the state, reviewed financial and hiring records, and observed operations firsthand.
What they found was a paradox worth paying attention to.
On one hand, the higher wages created a dramatic surge in job applications, August 2024 saw a 400% increase in applicants compared to the same month in 2023. Makes sense. Better pay, more interest.
But on the other hand, businesses were quietly pulling back on the hours they offered existing workers. One Burger King franchise group reported a more than 21% decline in shift hours between October 2023 and October 2024. Some locations partially restored hours by 2025, but labor-hour levels remained lower than pre-law levels.
It's like a store raising its prices to attract wealthier shoppers, but then reducing inventory. More people want in. Less is available.
At 18 McDonald's locations in California's Central Valley, workers' hours declined by nearly 12% across a 12-month period from April 2023 to March 2025, equivalent to the loss of 62 full-time jobs for a year.
Menu Prices Climbed 8–12%
And then there's the price side of the equation.
The $20 minimum wage increased labor costs for businesses by approximately 25%, which researchers say could raise overall operating costs by about 9% if companies made no other changes.
Businesses made other changes. Specifically, they raised prices.
Franchised fast-food restaurants increased their menu prices by approximately 8–12% from September 2023, a combination of higher labor costs being passed on to consumers and other inflationary factors.
Here's the uncomfortable irony: fast food is often what economists call an "inferior good." That's a technical term for something people buy more of when their income is tight, not less. Think: when money's short, you skip the $18 sit-down meal and grab a $5 value combo.
Because fast food skews toward lower-income consumers, these price increases will disproportionately affect the very people the law was meant to help.
Automation Is Accelerating, And Nobody's Talking About It Enough
This is where the story gets quietly alarming.
To cut costs, many fast-food chains are investing in automation technologies, self-ordering kiosks, AI-powered drive-thru systems, and robotic kitchen equipment, which could lead to significant job losses in the sector over time.
UC Santa Cruz researchers say the $20 wage is speeding up automation adoption, kiosks, mobile ordering, AI voice systems, even automated dishwashing. The argument isn't that technology wasn't coming. It's that wage pressure may be accelerating the timeline.
Think about the last time you walked into a McDonald's or Burger King and ordered from a screen instead of a person. That's not just a tech trend. In California, post-AB 1228, it's increasingly an economic response.
That matters most for first-job workers. Fast food has long been one of the most accessible places for teenagers and people with limited work history to get hired, and fewer openings per shift, over time, could quietly close that door.
The Other Side: UC Berkeley Says No Job Losses
To be fair, and this story demands fairness, not every researcher reached the same conclusions.
UC Berkeley's Institute for Research on Labor and Employment reported no negative effects on fast-food employment and estimated price increases of only about 1.5%, roughly six cents on a four-dollar hamburger.
The Berkeley study also found that average weekly wages for fast food workers increased by 11%, and that employers passed on roughly 50% of the higher wage costs to consumers.
UC Berkeley researcher Michael Reich put it plainly: "Minimum wage increases have minimal effects on jobs, make it easier for employers to recruit and retain workers, and lead to modest price increases."
Competing Methodology, Competing Conclusions
So why are two serious research teams looking at the same law and reaching opposite conclusions?
It comes down to methodology. UC Santa Cruz's study combined direct interviews with fast-food managers and owners, all located within less than a mile of each other along Mission Street in Santa Cruz, with broader public labor market data.
That's the UC Berkeley team's main critique: the Santa Cruz study's field observations were hyper-local. Governor Newsom's communications director went further, calling the study "based on a handful of interviews on one street" and its claims "flat wrong."
UC Santa Cruz fired back too, their paper directly criticizes the UC Berkeley researchers' earlier work for making "no mention of fast food restaurants responding to the increase in the cost of labor through automation."
Both sides make valid points. The honest answer is: the full picture is still developing.
The Real Impact on Workers: More Pay Per Hour, Less Pay Per Week
Let's cut through the academic debate for a second and ask the most important question: Are fast food workers actually better off?
The answer, frustratingly, is: it depends on how you measure it.
Even though most covered workers now earn more per hour, many have fewer hours, which limits improvements to their overall earnings. With reduced hours, fewer employees also qualify for benefits.
There's another wrinkle. Many franchises have eliminated overtime entirely, which had previously been an important pathway for longer-term employees to meaningfully increase their annual earnings.
So the worker who used to make $16/hr × 45 hours/week might now be making $20/hr × 30 hours/week. The hourly rate went up. The paycheck didn't move much, or may have gone down.
That's not a talking point. That's arithmetic.
One silver lining worth acknowledging: UC Santa Cruz noted that employee turnover dropped, from the typical 150%–300% churn rate down to roughly 150%–200%. Higher wages make workers more likely to stay. That's real, and it matters. Stable teams mean better service, lower training costs, and more experienced workers on the floor.
What Happened to Fast Food Jobs Overall?
The job loss numbers vary depending on who you ask and how they count, but they all point in the same direction.
A Berkeley Research Group study found that California's fast-food restaurants lost 10,700 jobs between June 2023 and June 2024, marking the steepest decline in this century outside of the Great Recession and the COVID-19 pandemic.
A Cato Institute analysis using Bureau of Labor Statistics data estimated that AB 1228 reduced fast-food employment by 3.6%, suggesting California lost approximately 18,000 jobs that could have been retained had the law not passed.
The range is wide, 10,700 to 18,000, because researchers use different comparison groups and adjust for different factors. But zero of these studies found a gain in employment.
Food prices at California's local restaurants also increased by 14.5% since the legislation was signed, nearly double the national average increase of 8.2% over the same period.
California's Governor Pushes Back
The Newsom administration isn't conceding the narrative.
His office called the UC Santa Cruz research "flat wrong", leaning heavily on the UC Berkeley study's more favorable findings and arguing that "higher wages are strengthening our economy and lifting workers out of poverty."
The governor's office also pointed to separate research from Harvard Kennedy School and UC San Francisco suggesting that higher wages came without reduced hours, staffing cuts, or benefit losses.
The political back-and-forth is real. And it reflects something true about economic policy: results are rarely clean, data can be sliced many ways, and the winners and losers of a policy change are rarely the same people.
What Should Policymakers Do Instead?
UC Santa Cruz's Owen didn't just document problems, he offered alternatives.
Researchers suggest policymakers consider improvements to the social safety net, changes to the earned income tax credit, and reductions in business regulations as ways to more directly help low-income workers, without triggering the unintended consequences of sector-specific wage mandates.
The argument isn't "don't help workers." It's "be more precise about how you help them."
Raising the earned income tax credit, for instance, puts more money directly in low-wage workers' pockets without pressuring employers to cut hours or invest in automation. It's less politically dramatic than a headline-grabbing wage law. But it might actually work better.
A Well-Intentioned Policy With Complicated Results
Here's the honest summary: California's $20 minimum wage for fast food workers was born from a genuinely good place. Workers in one of the world's most expensive states were struggling. Something needed to change.
But good intentions don't automatically produce good outcomes. As researcher Stephen Owen put it, "this legislation is a classic case of 'no good deed goes unpunished.' There are unintended consequences and knock-on effects, and overall, the results have definitely not been as positive as policymakers had been expecting."
Higher hourly rates. Fewer hours. Rising prices. Accelerating automation. An economy quietly shifting to replace the people the law was designed to protect.
That doesn't mean the policy is a total failure. It means it's complicated, and that anyone who tells you it's a simple win or a simple disaster probably has an agenda.
The data is still coming in. The studies are still being published. And somewhere in California right now, a fast food worker is tapping a $20/hr rate into their timesheet and wondering why their paycheck still feels thin.
That's the story worth telling.
Have thoughts on California's minimum wage experiment? Drop them in the comments. And if you found this breakdown useful, share it with someone who's been fed a one-sided take.
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