Study: CA Fast-Food Minimum Wage Hike Didn't Cut Jobs, Raise Prices Much

On April 1, 2024, California introduced its first sectoral wage policy, establishing a $20 hourly wage floor for workers in major fast food and nonalcoholic beverage chains. This policy, overseen by a Fast Food Council, aims to set future wage increases and recommend industry-wide standards for working conditions and training. The $20 wage is the highest in the U.S. and affects approximately 750,000 workers, with 90% of non-managerial employees earning less than this amount prior to the policy. Research indicates that the new wage standard significantly increased average hourly pay by 18% without reducing employment levels. Prices in the affected restaurants rose by about 3.7%, translating to an increase of approximately 15 cents on a $4 hamburger. This price increase was less than industry predictions, with 62% of the additional costs passed on to consumers. The findings suggest that restaurant profit margins, which were previously above competitive levels, absorbed a significant portion of the cost increase. The demand for fast food being highly price-inelastic indicates that the price hikes likely enhanced restaurant revenues, ultimately benefiting parent companies of franchise owners.

- California's sectoral wage policy sets a $20 minimum wage for fast food workers.

- The policy increased average hourly pay by 18% without reducing employment.

- Prices in affected restaurants rose by approximately 3.7%.

- 62% of the increased costs were passed on to consumers.

- The policy is expected to benefit parent companies of franchise owners.