California put up its fast-food wage to $20. Its governor is adamant it's not causing employment to fall.
Critics of the legislation warned that the higher wages could lead to restaurants laying off some of their workers, or even closing down.
AP Photo/Rich Pedroncelli
- California put up its minimum wage for workers at quick-service restaurant chains to $20 in April.
- The California Business and Industrial Alliance warned that it was costing jobs.
- But employment in the industry is seasonal and usually rises and falls throughout the year.
Since Gov. Gavin Newsom first announced plans to raise wages for fast-food workers in California, both restaurant chain executives and franchisees have warned about the impacts it could have on their businesses.
As well as having to raise menu prices, some critics of the legislation warned that the higher wages could lead to restaurants laying off some of their workers, or even closing down.
Despite intensive lobbying from the fast-food industry, the new wage of $20 an hour for quick-service chains with at least 60 locations nationwide went into force on April 1.
The California Business and Industrial Alliance certainly isn't happy with the legislation. It took out a full-page ad in USA Today in early June featuring mock obituaries for brands it says were "victims" of the new minimum wage.
The CABIA claimed in the ad that nearly 10,000 jobs had been cut between September, when Newsom signed the law, and January.
"Governor Newsom's bad policy remains indefensible, and workers and businesses are suffering for it," Tom Manzo, founder of the CABIA, told Business Insider over email. "It is obvious what is happening to the Fast Food industry no matter how Team Newsom spins the numbers."
The CABIA ad cited data from the Hoover Institution, a public policy think tank and unit of Stanford University that aims to "limit government intrusion into the lives of individuals."
It's unclear where the Hoover Institution got its 9,500 figure from, though it did link a report by The Wall Street Journal, which said it used state figures.
Business Insider could not independently verify these figures, as data from both the California Employment Development Department and the US Bureau of Labor Statistics shows a drop of about 11,600 jobs when not seasonally adjusted.
The CABIA's argument was based on a drop in employment between September and January. But BLS data shows that employment in California's limited-service restaurant industry dips in the winter. In every year for at least the last decade, employment has been lower in January than in the preceding September.
It's typically at its lowest in January and its highest in August.
The BLS data includes employment at all limited-service restaurants, including those exempt from the new minimum wage.
Restaurants typically hire more workers during the summer months as tourism fuels spending and people spend more time outside their homes.
Seasonally-adjusted BLS figures, which take yearly fluctuations into account, show that employment in California's limited-service restaurant industry actually rose by about 6,000 people between September and January.
Newsom has clapped back at criticism of the new minimum wage
"California's fast food industry has added jobs every month this year, including roughly 10,600 new jobs in the two months since Governor Gavin Newsom signed the fast food minimum wage bill into law," his office said in a recent press release.
The following graph, made using BLS data, shows that employment in limited-service restaurants in California has been higher than 2023 levels for every month so far this year when not seasonally adjusted.
However, Newsom's remarks have to be taken with a pinch of salt, too. The year-over-year growth in limited-service restaurant employment is a continuation of a trend seen before the pandemic, too, with total employment in the industry growing every year.
And the month-on-month growth in employment so far this year is nothing new. Employment typically grows in the buildup to the summer.
It is clear some fast-food chains have laid off workers in California, including in some cases by closing restaurants, partly in response to the new legislation. Seasonally-adjusted BLS data suggests that there has been a small dip in workers in California's limited-service restaurant industry — about 2,500 — since January.
However, the BLS statistics suggest that the situation is not as dire as the CABIA paints it to be.
The $20 minimum wage was introduced to support workers in a state with a notoriously high cost of living. The fast-food industry is generally known for low pay, with some workers having to pick up a second job to make ends meet.
Analysts previously told BI that the legislation is also expected to boost wages in other industries, as employers will face more competition for workers.
Have you been affected by California's new $20 minimum wage? Email this reporter at gdean@insider.com.