Berkeley, CA – A new study from the Center on Wage and Employment Dynamics at UC Berkeley offers a careful analysis of the effects of California’s recent minimum wage increase for fast food workers. The policy, which took effect in April 2024 and raised the minimum wage to $20 per hour, marks a significant shift in wage regulation. The study, released as California’s Fast Food Council considers further wage increases in 2025, presents compelling evidence that the $20 hourly wage has significantly raised worker earnings without job losses or concerning price hikes.
Sectoral Wage-Setting in California leverages novel data on wages and prices at individual restaurants, including over 11,000 reported salaries on Glassdoor. The menu price data come from over 1,500 California restaurants and a similar number in states without recent wage increases. This approach enables the authors to isolate the causal effects of the wage policy from broader market trends.
Key Findings:
- 18% Pay Increase: The new wage policy raised average hourly pay by 18 percent, lifting the earnings of workers in large fast food chains, 90 percent of whom previously earned below $20 per hour.
- Stable Employment: Contrary to fears expressed by restaurant groups, the wage increase did not lead to job cuts. Employment levels remained steady across the fast food industry.
- Modest Price Increases: Prices of popular menu items rose by 3.7 percent, translating to an increase of just 15 cents for a typical $4 hamburger.
Consistent with recent minimum wage research, the findings challenge the outdated assumption that significant wage increases lead to job loss. “We find that a carefully implemented sectoral wage floor can raise worker pay without reducing the number of jobs or substantial consumer cost burdens,” says report co-author and Berkeley economics professor Michael Reich.
California’s sectoral wage policy experiment is both large-scale and groundbreaking. If deemed successful, it could pave the way for similar policies in other states and industries. Indeed, California is already preparing to roll out a second sectoral wage policy for health care workers. This study, the first to marshal systematic data and rigorous analysis, provides policymakers with a timely, evidence-based assessment of the policy’s effects on wages, employment, and prices.
To discuss the report findings in greater detail and answer questions about the research methodology, findings, and policy implications, the authors will host a virtual press briefing tomorrow, October 1. Details below. Read the full report.
PRESS BRIEFING
- Date: October 1, 2024
- Time: 8:30am PT
- Platform: Zoom
- Link: https://berkeley.zoom.us/j/97199520739
Contacts:
- Ana Fox-Hodess, communications director, afoxhodess@berkeley.edu, (510) 915-6993
- Michael Reich, report author, mreich@econ.berkeley.edu, (510) 384-4551
The Center for Wage and Employment Dynamics (CWED) is a project of the Institute for Research on Labor and Employment (IRLE) at UC Berkeley. IRLE connects world-class research with policy to improve workers’ lives, communities, and society.
