In a recent Fox News opinion piece on September 18th, California Governor Gavin Newsom bragged about the supposed success of the new $20 minimum wage for many fast-food workers in his state. However, the facts show a different story of lower employment growth for workers and higher prices for consumers.
Governor Newsom’s claim that fast-food employment is at an all-time high relies on dubious employment data, as it has not been seasonally adjusted. His claims don’t stand up to scrutiny once one looks at the seasonally adjusted data, with fewer fast-food jobs in California than earlier this year. The new minimum wage went into effect in April, and over the following two months fast-food employment fell; it has only just gotten back to where it was before the new minimum wage was passed.
Even taking the numbers the governor provides at face value shows a steep decrease in employment growth year after year starting just before the new minimum wage went into effect. This result is strong enough that in June, the month before the data Governor Newsom points to as a success, fast-food employment was lower than the year before. Between January and July in 2023 California added 31,700 new fast-food jobs. However, 6,100 fewer jobs were added in the same period of 2024.
This decrease in employment was predictable when the new minimum wage law was passed. Wages increased, but so did consumer prices. When prices go up people buy less. This is as applicable to labor as it is to anything else. For instance, when wages are artificially forced up, employment is pushed down. In fact, layoffs and price hikes were announced just before the new minimum wage even went into effect because of its anticipated consequences. The new higher wages are good for those workers who get them, but for others their new wage is “unemployed.”
Laid off workers are not the only people who lose out in this deal. Consumers do too. When the cost of doing business is increased, such as by increasing the minimum wage, it is passed on to consumers through higher prices.
In California, menu prices at fast-food restaurants are up 7.5 percent over the last year, more than twice the national average of 3.1 percent. The increased prices have resulted in fewer fast-food sales. California is the second most expensive place to order a burger or pizza, only behind Hawaii, and third for a chicken sandwich where Alaska joins Hawaii in topping California. Hawaii and Alaska have the excuse of distance and shipping costs to ship products there; whereas in California, the high prices and slowing job growth are an artificially created problem.
The California minimum wage law has resulted in 98 percent of fast-food restaurants in California raising prices and nearly 90 percent of them reducing employee hours. Similar numbers of fast-food restaurants are expected to do the same again next year.
California already has a base minimum wage of $16 per hour, one of the highest in the nation. California is also the most regulated state in the Union, which in turn increases the cost of nearly everything consumers buy, making it much less affordable for fast-food workers and others earning minimum wage. Instead of adding another costly regulation that increases prices and chips away at consumers’ purchasing power, Governor Newsom should take a closer look at the regulations California already has in place for ways to reduce the cost of doing business and living in California.
From zoning to occupational licensing to high gas taxes, the regulatory burdens that California imposes on its citizens eat away at everyone’s paychecks. Governor Newsom could give the whole state a pay increase simply by removing onerous and costly regulations that drive up the cost of living. This would also relieve pressure on employers, freeing resources to hire employees instead of firing them.
Rather than micromanage their way out of the problem they created, Governor Newsom and regulators in California should take account of how their controls have made one of the highest minimum wages in the country insufficient to live on.
