California's $20 minimum wage for fast-food workers led to 'negative outcomes,' researchers say

Researchers found that California's minimum wage hike for fast-food workers led to "negative outcomes" such as automation and reduced work hours.

The researchers at the University of California, Santa Cruz suggested in a report published in March that the policy could produce unintended consequences such as an increase in menu prices, a loss of overtime and benefits, reductions in employee working hours, and an implementation of automation that replaces workers.

The minimum wage for workers was $16 before the $20 minimum wage for fast-food workers became law in April 2024. Gov. Gavin Newsom said in September 2023 the increase would help workers earn more as the cost-of-living rises. 

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"The results indicate a plethora of negative outcomes such as higher menu prices for consumers, reductions in employee working hours, widespread elimination of overtime and loss of benefits for employees," said Stephen Owen, an economics lecturer, University of California, Santa Cruz.

"Further decreases in employee opportunities are being driven by automation and the adoption of labor replacement technologies is accelerating."

The report came after a Berkeley Research Group study discovered not only were there 10,700 jobs lost between June 2023 and June 2024 in the sector, according to Bureau of Labor Statistics data. The prices at the establishments soared by 14.5% after the new minimum wage became law.

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Despite the findings, California officials doubled down on minimum wage laws.

A phased-in minimum wage hike in Los Angeles mandated up to $30 per hour for airport and hotel workers. The law was signed into law last year by Mayor Karen Bass, mandating that their hourly wage must be raised by $2.50 each year until they reach $30 in 2028. 

The Hotel Association of Los Angeles (HALA) recently commissioned a study that found hotels have eliminated or expect to eliminate 6% of positions, roughly 650 jobs, since the Hotel Worker Minimum Wage Ordinance took effect in September.

While these laws raise concern from business owners, advocates in Oakland, California are pushing for a $30 minimum wage.

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On the East Coast, the city council in New York City is weighing a proposal to boost the minimum wage to up to $30 — a move that newly elected Mayor Zohran Mamdani signaled that he would sign on the campaign trail — causing consternation among the business community.

The proposal from New York City Council Member Sandy Nurse, a Democrat representing Brooklyn, would require employers to pay workers $25 an hour if those employers provide qualifying benefits and $30 an hour if not. The current $17 minimum wage would undergo a phased increase to reach $30 per hour by 2030 for businesses with 500+ employees and $29 by 2032 for smaller businesses. 

Business owners in New York City reportedly warned of dire consequences if the law passes.

"We feel like we’re at a tipping point with consumers," said Melissa Fleischut, president of the New York State Restaurant Association.

The mandate was a campaign pledge from Mamdani, who promoted a "$30 by '30'" minimum wage message. 

Newsom's office did not respond to Fox News Digital's request for comment. Owen also did not respond to Fox News Digital's request for comment.