California’s $20 fast food wage law (Assembly Bill 1228) turns one year old on Tuesday. Proponents, including the Service Employees International Union (SEIU) and Gov. Gavin Newsom, have portrayed the law as an economically painless gift to restaurant workers. But the best available data shows there’s not much to celebrate: The law has cost thousands of restaurant jobs, driven double-digit menu price inflation and even caused some locations to close.
Newsom signed the $20 minimum wage into law in September of 2023, the product of a negotiated settlement between business and labor that kept a referendum on a related law off the ballot. While the business community avoided a costly election-season battle, restaurants were left scrambling on how to adapt to the new wage.
Fast food operators warned of unintended consequences for customers and employees. And those warnings have since proved accurate.
Restaurant prices have risen dramatically since the law was signed. California’s fast food prices increased 14.5% in the past 18 months since the law was signed, according to Berkeley Research Group analysis of Datassential’s fast food chain pricing data. This is double the rate of increases in the rest of the country. And the impact is unique to fast food: California’s fast food prices have jumped roughly five percentage points faster than full-service restaurant counterparts in the state.
Many customers are voting with their wallets. Business Insider reported that foot traffic in California’s fast food restaurants has significantly declined following the implementation of the $20 minimum wage, caused by price increases that has driven away customers. The Wall Street Journal memorably headlined one news piece: “California Fast-Food Chains Are Now Serving Sticker Shock.”
The sticker-shock of higher prices means that many restaurants have been forced to reduce costs elsewhere to adapt to the new law. And the negative impact on restaurant jobs has been enormous.
Since the governor signed the law, California has lost more than 16,000 fast-food jobs, according to the latest and best available government data from the Quarterly Census of Employment and Wages. To put that into perspective, California’s lost fast food jobs represent two-thirds of all fast food job losses nationwide over this time period.
In fact, the 2024 employment drop represents the first net loss of fast food jobs in California in the last 15 years (aside from 2020 losses due to COVID pandemic-related shutdowns).
This pain is likely to continue in the near-term, as more employers pull back on further expansion. An Employment Policies Institute survey of nearly 200 impacted California fast food restaurant operators found price increases and layoffs are likely going to continue through this year. On top of that, three-fourths said the law has increased the likelihood of shutting their restaurants down. Some already have, and a majority report that they may be forced to take their business outside of California.
Newsom has offered a rose-colored view of the $20 wage law, recently touting it as a “win-win-win” for the state. But the law’s consequences have become increasingly difficult to ignore, as datasets once-touted by the governor now show that his signature law has caused harm. Even the Newsom’s favored economists, at a union-aligned research center at UC Berkeley, recently released a report suggesting that several thousand jobs have been lost.
The SEIU is eager to see California raise the $20 standard higher and is presently advocating for the state’s Fast Food Council to enact a cost of living increase. But before causing more hardship for small businesses, the state needs an honest accounting of the damage done so far.