New study reveals crippling impact of California's minimum wage hike
By Alexa Cimino
Daily Mail
Jul 26, 2025
Governor Gavin Newsom defended California’s $20 fast food wage law despite a new study blaming it for thousands of job losses
California's dramatic fast food wage hike may have backfired, according to a new economic study – wiping out an estimated 18,000 jobs across the state in just one year.
The research, published this month by the National Bureau of Economic Research (NBER), analyzed the impact of Assembly Bill 1228, which mandated a $20 hourly minimum wage for fast food workers at large chains starting April 1, 2024.
According to the economists behind the study, fast food employment in California dropped by 3.2 percent, while jobs in the same sector grew slightly across the rest of the U.S.
'Our median estimate translates into a loss of 18,000 jobs in California's fast–food sector relative to the counterfactual,' wrote researchers Jeffrey Clemens, Olivia Edwards, and Jonathan Meer.
Before the law took effect, California's fast food industry was tracking the same employment trend as the rest of the country, the study found.
But after AB 1228 was passed, the sector began to shrink.
'Following AB 1228's enactment, employment in the fast food sector in California fell substantially,' the paper states, citing declines 'even as employment in other sectors of the California economy tracked national trends'.
Critics say the figures confirm what many feared: that a massive one–size–fits–all pay hike would push jobs out of reach for the workers it was meant to help.
'When it comes to central planning, history keeps the receipts: Wage controls never work,' wrote Heritage Foundation economist Rachel Greszler in a column reacting to the findings. 'That's because policymakers can set wage laws, but they can't outlaw the consequences.'
She warned the law should serve as a wake–up call for other cities – especially Los Angeles, which recently voted to raise wages for hotel and airport workers to $30 an hour by 2028.
'The consequences of that wage hike on the fast–food industry should be a warning sign,' she said.
The Wall Street Journal editorial board echoed that message, slamming politicians for 'magical thinking' around wage hikes.
'The Democratic Party's socialist nominee for New York mayor, Zohran Mamdani, has called for increasing the city's minimum wage to $30. Andrew Cuomo, his supposedly more moderate competitor, wants a $20 minimum,' the board wrote. 'These guys will never learn because they don't want to see the world as it really is.'
But Governor Gavin Newsom's office has pushed back hard – questioning the integrity of the NBER paper and insisting California's wage law is working as intended.
Tara Gallegos, Newsom's deputy director of communications, dismissed the study as politically motivated, telling Fox News Digital that it was 'linked to the Hoover Institution,' which she claimed had previously published 'false or misleading information' about the state's wage policies.
She pointed to an October 2024 report in the San Francisco Chronicle, which said the early effects of AB 1228, 'defy a lot of the doom–and–gloom predictions' made when the bill was signed.
California’s fast food sector reportedly shed 18,000 jobs after the $20 minimum wage took effect in April 2024
The NBER study found a 3.2 percent decline in California fast food jobs compared to the rest of the U.S.
Gallegos also cited a February 2025 study by a UC Berkeley professor, which looked at fast food employment trends through December and found 'no negative effects.'
'Workers covered by the policy saw wage increases of 8 to 9 percent, with no negative wage or employment effects on non–covered workers,' she said. 'No negative effects on fast–food employment.'
She added: 'The number of fast–food establishments grew faster in California than in the rest of the U.S.'
As for prices, the Berkeley study claimed menu costs rose by only 1.5 percent - about six cents on a $4 hamburger.
The NBER paper also looked at whether the law had a knock-on effect in full-service restaurants, which weren’t subject to the $20 mandate but compete for the same workers. The authors found smaller but still negative employment effects - a median drop of 2.12 percent.
And while critics were quick to blame the law for economic pain, the researchers warned against cherry-picking isolated data.
They used placebo inference methods to compare California’s job trends with other states - and in most cases, California showed the steepest employment drop.
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