Following California implementing a law raising its minimum wage to $20 for more than 500,000 fast-food workers in the state in 2024, Christopher Thornberg, founding partner of research firm Beacon Economics, offered a warning about the state raising its minimum wage.\u00a0<\/p>\n
\u201cCalifornia\u2019s well-intended push to reduce income inequality via wage floors is beginning to have a significant negative impact on some of our most vulnerable workers\u2014our youth, particularly those from lower income households,\u201d he wrote<\/a> earlier this year.<\/p>\n His concerns echoed those of fast-food franchise owners, one of whom told Fortune in 2024 that higher wages would be unsustainable<\/a> for smaller chains with slim margins.<\/p>\n But nearly two years after the law\u2019s passage, economists are seeing very different results than what was initially feared. A working paper<\/a> from University of California at Berkeley released this month found the policy increased average weekly wages for eligible workers by 11% and did not reduce employment. Prices increased modestly, about 1.5%, or the equivalent of about six cents for a $4 item.<\/p>\n \u201cThe results are nowhere as dire as predicted,\u201d Michael Reich, the study author and chair of the Center on Wage and Employment Dynamics at the Berkeley institute, told Fortune.<\/p>\n The study compiled payroll data from Glassdoor job postings and Square and collected data on how many workers entered a fast-food establishment on a given date using Advan Research, a firm aggregating cell phone locations. It tracked changes to food price using Doordash. The analysis uses a vastly different set of data to come to the same conclusion as previous research on California\u2019s minimum wage, which likewise found little impact of the law on employment, as well as benefits and hours<\/a>.<\/p>\n California\u2019s raised minimum wage for fast-food workers is part of a wider conversation the state is having around the distribution of wealth<\/a>, particularly as wage growth for low-income Americans is dwarfed<\/a> by those of higher-income households. California voters will decide in November if the state will impose a one-time wealth tax on residents making more than $1 billion. A survey<\/a> released last month in partnership with the Los Angeles Times, found that 52% of Californians were in favor of the ballot initiative.<\/p>\n \u201cMinimum wage is by far the most popular issue out there right now,\u201d Saru Jayaraman, president of national advocacy group One Fair Wage, which is campaigning for a $30 minimum wage, told Fortune<\/a> in March. \u201cBut the billionaires tax is a close second.\u201d<\/p>\n Though Californians\u2019 concerns mirror a nationwide anxiety about a growing K-shaped<\/a>, or two-tiered economy, the Golden State is nearly its own economic case study. California has a $4 trillion GDP, making its economy about the same size as that of the United Kingdom\u2019s. Home to more than 200 billionaires, the state also has the highest percentage of residents living below the poverty line<\/a> in the country, 18%, in part as a result of its high cost of living.\u00a0<\/p>\n Why economists believe panic over California\u2019s minimum wage law was overblown<\/p>\n Reich said evidence from his research suggests the concerns associated with raising minimum wages are overblown. For example, the 11% increase in wages found in the study is below that approximate 25% leap in California\u2019s $16 wage prior to the 2024 law. That\u2019s likely because many chains were already paying their workers above the minimum. In-N-Out, for example, was offering workers a starting salary of $17.50<\/a> in 2023. California cities like San Francisco and Los Angeles already had starting wages above the state minimum prior to the law.<\/p>\n Moreover, labor is 30% of a restaurant\u2019s operating costs, meaning that an 11% increase in wages would mean overall costs for a business would increase by just 3%, half of which is passed down to customers, resulting in a modest 1.5% price increase, according to Reich.<\/p>\n The study went as far as to say that increasing minimum wages could even increase revenue for fast-food restaurants. Higher wages are associated with increased productivity<\/a> and lower turnover<\/a>, Reich noted. Turnover can cost a fast-food restaurant an average of $5,864 per worker, per Cornell School of Hotel Administration<\/a> data, incentivizing companies to keep their employees. The small price increase could also be beneficial to restaurants, as the tick up would likely be negligible to customers.<\/p>\n \u201cWhen faced with small increases in fast food prices, [consumers] reduce the amount they spend by an even smaller amount,\u201d Reich said.<\/p>\n Other research has contradicted Reich\u2019s findings. A Cato Institute report<\/a> from November 2025 found, using Bureau of Labor Statistics data, that the fast-food sector lost 18,000 jobs relative to the rest of the labor market. The research backs up economist Christopher Thornberg\u2019s claims around hiked minimum wage having an outsized impact on workers who are younger and lower-income, characteristics disproportionately represented in fast food<\/a>. Thornberg did not respond to Fortune\u2019s request for comment.<\/p>\n A November 2025 study<\/a> from University of California at Santa Cruz found the minimum wage law was associated with higher menu prices, as well as fewer hours and benefits for restaurant workers. That research, based on interviews with restaurant managers and owners, lacked quantitative evidence, according to Reich.<\/p>\n However, future data on the impact of minimum wages on a state\u2019s economy may be hard to calculate given the confounding impacts of other policy changes, Reich said. For example, a University of Merced study<\/a>, using U.S. Census data, found private sector employment in California dropped 3.1% following the Trump administration\u2019s push to increase Immigration and Customs Enforcement immigration raids in the state, and future research on state employment will have to account for the dip, he added.<\/p>\n Though Californians\u2019 concerns mirror a nationwide anxiety about a growing K-shaped, or two-tiered economy, the Golden State is nearly its own economic case study. California has a $4 trillion GDP, making its economy about the same size as that of the United Kingdom\u2019s. Home to more than 200 billionaires, the state also has the highest percentage of residents living below the poverty line in the country, 18%, in part as a result of its high cost of living. It\u2019s very much a one of one, when it comes to the United States of America.<\/p>\n But California\u2019s minimum wage push may be setting a trend. Nearly two dozen states, as well as 66 cities and counties, will increase their minimum wages at some point in 2026, according to a National Employment Law Project (NELP) report<\/a>.<\/p>\n \u201cA lot of people are watching what\u2019s happening in California,\u201d Reich said. \u201cAnd it could be a model for the rest of the country.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Following California implementing a law raising its minimum wage to $20 for more than 500,000 fast-food workers in…\n","protected":false},"author":2,"featured_media":268950,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[7,9,8,5693,421,457,3479],"class_list":["post-268949","post","type-post","status-publish","format-standard","has-post-thumbnail","category-california","tag-california","tag-california-headlines","tag-california-news","tag-compensation","tag-food-and-drink","tag-gavin-newsom","tag-minimum-wage"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/268949","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=268949"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/268949\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/268950"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=268949"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=268949"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=268949"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}