California's $20 fast food minimum wage didn't lead to major job losses, study finds

A study from the University of California Berkeley’s Institute for Research on Labor and Employment found that a California state law raised the minimum wage for fast food workers did not lead to large job loses or price hikes.

AB 1228 went into effect in the Golden State April 1, setting a $20 per hour minimum wage for those working at fast food restaurants with less than 60 locations nationwide and restaurants located inside airports, stadiums and convention centers. The law further gave employees stronger protections and the ability to bargain as a sector.

"We find that the sectoral wage standard raised average pay of non-managerial fast food workers by nearly 18 percent, a remarkably large increase when compared to previous minimum wage policies," the study, published Sept. 30, said. "Nonetheless, the policy did not affect employment adversely."

The state had approximately 750,000 fast food jobs when the law went into effect, according to the study.

The California Business and Industrial Alliance purchased a full-page advertisement in the Oct. 2 issue of USA TODAY citing data from the Federal Reserve Bank of St. Louis that says that 5,416 fast-food jobs were lost from January to August.

Wage increases lead to small price increases

The study found that after the law went into effect prices saw a one-time increase of 3.7%, or about 15 cents for a $4 item. The study said that consumers absorbed about 62% of the cost increases caused by the law.

In a USA TODAY survey conducted in May, after the law took effect, the most expensive burger combo meal across the major fast-food chains was routinely found outside of California.

The study also suggested that the increase in wages would have positive knock-on effects for restaurants and franchise owners.

"The study closest to ours found that $15 minimum wages in California and New York increased fast-food wages and did not negatively affect fast food employment, while substantially reducing hiring and employee retention costs," the study read.