California's $20 fast-food wage law backfires

Gov. Gavin Newsom (D-CA) was all smiles two years ago when he signed the 
FAST Recovery Act, creating a $20 minimum wage for fast-food workers in 
his state.

He called the legislation a win-win-win that would benefit restaurant 
owners, their employees, and customers alike. Fast forward two years, and 
all those wins he touted are turning into big losses, according to the 
Employment Policies Institute.

However, in the two years since the FAST Recovery Act was signed, 
restaurants have been forced to cut staff, raise menu prices, and turn to 
automation, EPI said.

California made national headlines when two large Pizza Hut franchises 
laid off more than 1,200 in-house delivery drivers to cut costs, while 
others, such as Mod Pizza and Foster’s Freeze, decided to close up shop 
entirely.

“Newsom’s $20 wage has turned out to be nothing more than a boost to his 
own ego at the expense of fast food workers,” Rebekah Paxton, research 
director at EPI, told the Washington Examiner. “His consistent claim that 
the law is a ‘win’ is out of touch with reality, and lawmakers looking to 
mirror his job-crushing policies should think twice.”

According to EPI’s analysis, California has lost close to 20,000 fast-food 
jobs since Newsom signed the law. That’s nearly 25% of the country’s fast-
food job losses during that same period, according to an analysis of 
quarterly data released this month from the Bureau of Labor Statistics.

“These grim statistics should be a wake-up call for Newsom and other 
policymakers pushing for drastic wage hikes that will cause unintended 
consequences,” Paxton added.

Even employees who have kept their jobs are at risk of losing earnings. 
The law has cost nontipped restaurant workers 250 hours of work annually, 
according to the EPI analysis, which represents $4,000 in lost income 
under the state’s previous minimum wage for fast-food workers. 

The American Cornerstone Institute has pointed out hits to small 
businesses in particular.

“Unlike their multinational competitors, small businesses have a tougher 
time absorbing the increased costs of labor, leading to further 
consolidation of capital in the hands of the largest corporations. In the 
same manner, a state-wide minimum wage doesn’t make sense when applied 
uniformly across a state as big as California,” ACI said. “The costs of 
living in somewhere like San Francisco, for example, are much higher than 
in the rural parts of the state, where one can live much more affordably. 
To force the businesses in both areas to adhere to the same wage rates 
does not make sense and exerts profound distortions on local economies.”

However, it’s not just the workers and small businesses that are getting 
hammered by the law. Consumers are feeling it too.

Menu price data by Datassential shows fast-food prices in California rose 
more than 13% after April 2024, which comes out to be double that in other 
parts of the country.

However, competing research analysis by UC-Berkeley’s Center on Wage and 
Employment Dynamics, a research organization that typically sides with 
unions, found the opposite to be true.

The center’s September analysis found that the $20 wage did not reduce 
fast-food employment, didn’t change the hours worked, and only led to a 
2.1% increase in fast-food prices, or about 8 cents for a $4 item.

NEWSOM DIGS AT TRUMP’S WEIGHT AS WAR DEPARTMENT SEEKS TO ELIMINATE TROOP 
OBESITY

“Restaurant revenues likely increased,” researchers Michael Reich and 
Denis Sosinskiy found. “The royalty fees restaurant operators pay to 
franchisors, therefore, probably rose as well.” 

An email to Newsom’s office for comment by the Washington Examiner was not 
returned.

https://www.washingtonexaminer.com/news/3831205/california-fast-food-wage-
law-backfires/