Did California's fast food minimum wage reduce employment?
nber.org
nber.org
First, all food/beverage hospitality workers in California.[1] Huge COVID transient, followed by recovery to almost the pre-COVID level. But no further increases.
Full-service restaurants had a similar transient, but never came back to pre-COVID levels. Employment peaked in mid-2023, and has declined since. Full-service restaurants didn't get the $20 fast food minimum wage. But workers there may have tip income. California does not have a lower "tipped minimum wage", and all tips go to workers.
What FRED calls "limited service restaurants and other eating places" shows about the same curve as full-service restaurants.[3] This includes both the fast food chains and the fast-casual restaurants. If you have to order at a counter, it's "limited service", even if they bring out the food later.
So, the part of the restaurant industry that wasn't affected by the increase shows about the same trend as the part that was. Basically, post-COVID, onsite eating never fully came back. Food delivery became a much bigger part of the industry.)
Those stats are regardless of business size. California's minimum wage law for "fast food" applies only to businesses with at least 60 locations. But it also includes such things as 7-11 stores that sell hot dogs and pizzas heated up on site. So, not an exact match to the FRED categories.
Overall, the COVID transient and its aftermath is bigger than all other visible effects.
[1] https://fred.stlouisfed.org/series/SMU06000007072200001SA
[2] https://fred.stlouisfed.org/series/SMU06000007072251101A
[3] https://fred.stlouisfed.org/series/SMU06000007072259001SA
These numbers are trending up as costs go up, and owners are pretty ruthless about staying on top of labor and materials and discounts (https://fransmart.com/dan-rowes-tips-for-learning-the-recipe...).
Customers are really turning against the ever-increasing price of going out to eat, with the perception that quality isn't improving. Tipping is another issue that really rubs people the wrong way.
It's a joy to visit countries like Spain or Taiwan or Japan where costs to eat out are very reasonable, quality is good, tipping is nonexistent, and you don't feel like you're being hustled out the door to improve some cold turnover metric.
When things went back to normal, the prices to eat out had jumped so high, it simply wasn't worth it. $15 of fast food to feed both of us turned into $35-40. A $45 dinner out at a restaurant (taxes and tip included) turned into $60-75 meal. Tip expectations had gone from 15%-18% to 20-25%. Add beer or wine or a cocktail and we're instantly at a $100+ night out.
At home $10 of protein, $5 of vegetables and other ingredients and a good youtube video with a recipe, $15 bottle of wine and we were all set.
Lunch specials fortunately are still under $15 at our favorite places, but only on weekdays.
With these prices, restaurants and eating out in general has become completely inaccessible to a huge swath of people. And even for those who can afford it, it’s a less frequent treat. It has a noticeable impact on the liveliness of the city and the social vibe, from my experience.
For the restaurants, their rent is pushing like €250-300/m^2 (or much higher in some locations, much lower if you drive more)
Online shopping has removed some proportion of the reason people would visit a city downtown. Remote working has removed some proportion of the reason people would be in a city downtown. There has to be some unreproducible draw to get people to go to a city: The Vatican/Mona Lisa; food and culture not available elsewhere, etc. Conversely the city has to be not a s.hole.
It’s interesting to me that it hasn’t depressed commercial real estate prices all that much. Rents are still crazy expensive, with many vacant storefronts and even entire buildings along the light rail lines. The market forces around commercial real estate seem disconnected from reality in a surprising and unintuitive way.
Still, downtowns can be cyclical. NYC in the 70s is a prime example. The days of Taxi Driver are long gone. I guess the question is what stimulus needs to be applied to kickstart the turnaround process.
> In unadjusted data from the Quarterly Census of Employment and Wages, we find that employment in California's fast food sector declined by 2.7 percent relative to employment in the fast food sector elsewhere in the United States from September 2023 through September 2024.
This is a common observation and should make more people ponder: why is it that higher local wealth/economic productivity increases homelessness (especially if you control for public services to counteract the effect)?
May I suggest the book Progress and Poverty by Henry George https://www.gutenberg.org/ebooks/55308 that asks almost the same question. The answer is that private land ownership allows landowners to capture economic growth of prosperous places, so wages barely cover rent at the margin. This is particularly relevant to California which passed a disastrous constitutional amendment Proposition 13 (1978) which slashed property taxes from around 2% to 1% and declining, especially for older estates, which is pretty much the opposite of the ideal policy to deal with the problem of rising rents.
But ALSO - these areas tend to lean towards higher levels of social services such that they have much higher homeless shelter / services / etc per capita.
So while many people may go homeless in place, certainly there is some homeless migration towards areas that actually provide food/shelter and don't harass/arrest them/chase them away.
People move there for the jobs, and the ones who do have jobs tend to have relatively well paying ones, so can pay more for housing. But the ones who don't have a well paying job are in trouble...
https://worksinprogress.co/issue/why-housing-shortages-cause...
2. Remote areas don't have services that cater to homeless people.
The cost of living here is about 1/2 of the USA, with rents about 1/4. The unemployment rate is about 5%.
Homelessness is very, very low (to the point of near invisibility) and mostly limited to illegal immigrants.
The thing that seems to make homelessness a non-issue here is the tolerance of ad-hoc construction. This leads to neighbourhoods where construction is really low cost / quality, but people are housed.
I don’t really understand why these neighbourhoods don’t devolve into hotbeds of violent crime as I would expect them to in the USA, but they mostly don’t.
Mostly, the construction tends to improve over time, and the neighbourhoods often gradually metamorphosize into more contemporary and inviting areas with vibrant small businesses and elegant homes.
I often wonder if it’s cultural, as poverty is not seen as failure but rather a temporary condition to be transcended as possible?
This could get a lot worse before it gets better.
So while one does not need to say "literally" in that sentence (it wasn't figurative, after all), it is possible to say "zero homeless folks" as there may be data backing the statement up.
Take for instance a proposal that says "no one is allowed to sell their used car for less than $10k". Maybe the justification is poor people are desperate and sell their car too cheap and all these dealerships and buyers are a monopsony underbidding the real value of the car, profiting off these uninformed, unorganized individual sellers.
Does anyone think this is a good idea? Would anyone bother reading studies contemplating the effect this may have?
No, of course not. Everyone knows that this would essentially mean many cars that would have sold under $10k would just not get sold. Sure some people would benefit, maybe getting a higher price for their car. Some things would shift, maybe people would opt for scooters or e-bikes or something.
But I wouldn't want this price floor if I was on either side, trying to offload a bad car or buying one.
In places with strong unions, there is often a de facto, negotiated minimum at least on a sector by sector basis instead.
E.g. Norway has a roughly 50% unionisation rate, and no minimum wage in most situations, but most sectors are covered by negotiated agreements between the unions and employer organisations.
(Btw, the American healthcare system is about as far away from a free market as it gets. Don’t think that example supports your point.)
This is very different from most other goods, because no one really cares if you break your chair, the chair's parents didn't spend 18 years of their life on it, etc.. If you break a chair, you bear the full costs of replacing it.
Also, the full cost of replacing a human is vastly higher than the maintenance wage.
Because min wage policies have a cost and a benefit. The benefit only happens at relatively low numbers (enough for basic necessities). After that point you dont get more benefits but the costs still increase.
Because you intentionally picked large unreasonable number and now want to argue it implies much smaller number is reasonable.
If maximum speed of 50km/h is reasonable in cities, why not making it 5km/h?
If your question is why is minimum wage a good policy, you could start here for a summary of the arguments and evidence: https://en.wikipedia.org/wiki/Minimum_wage
The obvious alternative is to tax the rich to feed the poorest. We can start with capital gains.
Prevent a desperate race to the bottom? Ensure something approaching a minimum wage? Nobody cares, so long as they're getting a UBI check from the government.
Not really? Other countries do industry-wide union agreements that apply to the whole sector, seems to work well enough for them.
When facts conflict with beliefs we hold dear and perhaps define our identities, our brains are very skilled at finding ways to keep believing what we want to believe.
Especially when the facts define your in-group. Changing such beliefs, makes you one of the people you and your friends hate. The mind will convince itself of pretty much anything to avoid such social suicide.
I am open to being convinced by either you or OP but your argument is failing to do so.
Labor isn't just another good, it is actual human beings whose wages greatly affect their quality of life.
Your rant about in-groups is odd.
We can't quite get it together on saying "food, shelter, healthcare are human rights" or it's sinister sibling "we'll let you die in the cold if there's no profit to be had from you".
Those are both consistent, actionable policies, but no one wants a consistent policy on this because everyone gerrymanders it dofferently.
So we get clunky hacks like minimum wage that are sort of the average of Aspirational Star Trek and Aspirational Blade Runner.
You could flip this and say "you're comparing people who are selling off an essential possession just to survive to a bit of company work."
The way people frame things in completely different ways to justify their preexisting beliefs is part of the reason why it's difficult to get people to consider other possibilities. The person could be doing their job to survive, or they could be working a few hours on a fun job on the weekend for a bit of extra cash. A person might just be getting rid of their used vehicle, or they might be giving up an essential possession because they're in dire straights.
Your statement makes it seem as if these populations are of equal size, but in reality the vast majority works to survive.
An item should not have a minimum price as it is just an item, meanwhile every person is, well, a person, and should be able to sustain themselves.
These laws take the form of transfer and registration fees for vehicles, taxes, and especially inspection requirements. We also have much stricter requirements on what a large commercial enterprise can sell versus a private individual.
We have rules like that for everything. We also say you can’t sell houses for less than X by mandating things like how many stairwells they have, and so on.
To the extent you’re tempted to argue some semantics about how you could still sell a car for a dollar you’re wrong and missing the point on purpose by arguing over the definitions in a way that doesn’t change the principle.
We do this because we are a society and we get to decide what the society looks like. Prices are downstream of our value system.
We do not want a race to the bottom for wages. If full time employment is not enough for basic necessities, that is the sort of thing that leads to riots. Society in general does not want that. Society prefers stability.
We’re a few years from the Walmarts in the really bad parts of town turning to pickup and delivery only.
This is sarcastic of course. Ideally if our economy distributed rewards across all of society everyone would be for changes like this if they did actually speed up automation
Why spend $$$$$$ developing a drone delivery system that might face insurmountable technical hurdles like range, capacity and safety if you can just pay undocumented migrants on bicycles $2 per delivery?
I personally know a couple of Uber Eats restaurants whose only physical presence is literally a garage in a residential neighborhood, and they only take orders from the app. I also know of a Uber Eats competitor whose business model includes rider hubs that stock on a limited set of high volume products for quick delivery.
I wouldn't call them net loss of jobs per se. I see those as entirely different businesses with completely new business models. It's more a kin to ordering groceries online than to going on a night out.
Once I'm just ordering a shitty burger from a machine, I have probably lost any reason to give them my money at all, there is just way better alternatives.
More money in low wage jobs is mostly spend and not saved and can lead to more jobs in other sectors.
If the owner was to overhire, it might reduce the homeless population a little, but at great cost. And other businesses nearby will benefit for free.
Only large coordination at the level of state or national government can afford to implement welfare as a real investment in their citizens. If you do it at the city, county, or corporate level, it's just charity.
You make the same assumptive leaps, which are based in fallacy, that cause this route to be a giant circle without agency/choice.
Your, "Tragedy of the commons" implies there's nothing you can do to change the world unless you are at the top of government, and that is both wrong, and the perspective of a demoralized hopeless person.
Actions matter, and you can do quite a lot at the local level by building strong community, and community is not government.
My first time being into a McDonalds since I was a kid was earlier this summer when I gave my 3 year old the option of going in or staying in the car. I was pretty shocked at how barebones it was now. There weren't even napkins available and none with our food...which, when you have a kid with, is an issue.
People started treating "meeting other people in person" as a tiresome chore, and the world is adapting to that change.
Someone linked the short story The Machine Stops by E. M. Forster the other day where this is an element. A character makes a big deal of having to meet her son in person, opposed of through the machine.
Written in the 20s, gets a lot of things uncannily correct for a society 100 years later. Video calling, silence/do not disturb mode, notifications, air conditioning, people no longer wanting to look at real things with their eyes, etc.
Pre-COVID, I used to go to a small kabob restaurant in Silicon Valley. During COVID, I'd order from them via Doordash. The food wasn't as good cold, though, even if re-heated. After COVID, I started going back in person. Often, I'd be the only in-person customer, despite a steady stream of deliver drivers going in and out. Now, they're out of business.
This is the REAL issue.
By that logic ending child labor is "still a net loss of jobs."
I mean, here you are talking about a business owner having issues with the local homeless population who are homeless because their jobs don't pay enough to afford housing.
All these business owners race to the bottom paying their employees scraps and then wonder why they have empty dining rooms with no customers to afford their products sold at record-high profit margins.
Obviously, minimum wage doesn't really fix the economy on its own, but it is a very important tool in a toolbox for ensuring that capitalism is restrained from following its worst instincts.
So aside from the fewer employees getting a raise, the businesses are now under financial stress because of the reduced revenue, the customers have fewer options for where to eat, and the State of California and the local city/county governments will receive less tax revenue from these restaurants.
Like most of the other recent California legislation, it's a "success" at further damaging the local economy and encouraging people like myself to stay away.
This study by UC Berkeley attributed a 3.7% increase in food price because of the minimum wage changes. It's quite likely that food overall getting more expensive is responsible for a lot of what you're seeing.
If we can't afford to pay people in California a wage where they can live here, then maybe the economy overall isn't sustainable? A $20 minimum wage is like $2800 take home per month and in many places that can barely cover rent.
My only point is that this seems like an awful lot of confirmation bias. Something everyone suffers from.
That's not exclusive to California - my state didn't have a similar minimum wage law but they have the same changes in their restaurants.
The bad news is, I basically stopped going out because I couldn't rely on businesses being open when I wanted to go.
The good news is, I've lost a lot of weight from not going out.
Anecdotally, this also describes how things have played out in the South generally. (Southern states generally have no set minimum wage, so they mostly default to the $7.25/hr set in 2009.) Perhaps this is different in other regions?
I have similarly stopped going to most "fast" food restaurants because the waits are interminable.
This is in states where an hour of minimum-wage labor will not gross you enough money to buy a pound of store-brand ground beef.
It's not the wage.
You may be shocked to learn this, but just because they follow the minimum wage doesn’t mean companies are _actually_ paying minimum wage. Even in my southeastern state, McDonald’s is paying $12/hour. Why? Because there’s no takers, even in a LCOL area, at $7.25/hour! That’s why all this handwringing over the federal is so stupid. Local labor markets will dictate what an acceptable wage is.
BUT in other parts of the state, especially rural areas, there are definitely jobs advertised for < $8/hr. In those areas, McDonald's is paying a premium wage compared to Local Burger Joint. McDonald's pays $12/hr so they can get a higher caliber of employee than Local Burger Joint. Neither pay as much as Perdue.
> what an acceptable wage is
We agree on this, but probably on what factors go into making a wage "acceptable" and the degree to which taxpayers in other parts of the state/country should have to subsidize those wages/owners' profits via social support programs.
(I understand there is a third group of people who don't really care if the working poor are able to eat, but in the spirit of charity I do not assume anybody willing to engage in discourse is in that group.)
The problem with that line of reasoning is that in the meantime:
- unemployment has declined, which means it's harder to find people wanting to work in such a place.
- inflation has kicked in, raising prices over the board.
In that context, attributing the changes you've seen to a particular policy is very very hard (and the linked paper doesn't do a better job than what you do here…).
The government doesn't interfere, it intervenes.
> but the changes in the restaurants were sudden, and coincided with the new wage law.
Says who? Even the paper doesn't claim such a sudden behavior. Also, the paper makes no attempt at estimating the effect of these confounders.
If it is a fast food joint... well, I can't speak for all of California, but the fast food places in the section of San Francisco that I live (and roam around) in seem to have a reasonably healthy amount of customers in them.
Perhaps things are different where you are, but I've noticed food getting markedly more expensive, have heard of commercial rents getting higher and higher, and have heard that many of the folks who would have done waitstaff jobs have decided to fuck off for places that were (at the time, if not now) less expensive than California. Oh, and there was the whole "flight from the expensive cities because WFH means that many folks don't have to tie themselves to an expensive, small apartment in a city they don't really like" thing a while back that gutted the downtowns (and leisure districts) of some-to-many big cities because -like- many folks exercised their new option to leave and left.
Were it me, I'd consider blaming factors like those before I blamed modest increases in wages.
If the desire is to reverse that trend, the best way to move the needle is to bring housing prices (by far the largest living expense) in cities back down to earth so they’re affordable to normal people again, however that’s best done (probably building more housing, unlike SF which decided to instead prioritize offices and retail, leaving it vulnerable when the pandemic hit).
https://www.5out.io/post/a-detailed-breakdown-of-restaurant-...
Feed the location of a business into a trip planner and note every neighborhood within reasonable commute radius. Calculate the average cost of renting a room in these areas and then multiply by three. That's your de facto minimum wage because you have no applicant pool beneath it.
Adding on to this, your competitors in a better financial position are all paying well above minimum. There's probably a McDonalds across the street starting people at five bucks an hour more than you, and they have that wage plastered on a banner right out front.
That’s a big success for the former group for sure. Whether that’s a policy success is slightly hazier than you presented I think, without other interventions to support those who are more likely to be harmed by the reduction in employment.
I agree that a lost job should carry some kind of premium compared to a total increase in wages paid, and you also have to go and look at the total hours worked to get a good picture, but if the total relative increase in remuneration was higher than about 10% or so I think that's probably enough to be able to hand wave the employment decrease.
If it only turns out to be 5% I'd be a bit iffier about it.
In the UK we have a pretty generous minimum wage (for over 21s), I think even relative to $20 in California, and the effect on employment has been very small while minimum wage jobs now give a pretty OK life, so I'm inclined to support high minimum wages generally.
That seems unlikely to be just that though, this study was just on the people who lost jobs. If 20,000 people are out of a job, there is probably another larger cohort on less hours. And we also don't know how much wages rose. The people who were fired were the ones who could only justify being paid the minimum. The ones who stayed might already have been paid more like $17, $18 or $19/hr.
So yes to what you say, but the study doesn't say anything about whether total compensation went up or down.
The gap between what a minimum wage job pays and what it costs to scrape by is covered by government or charity, if they didn't do that the workers would die, which means the jobs don't get done, so that means the resource spent by governments or charities as a result of a low minimum wage is a subsidy for the employer. Instead of paying what it costs they get it for cheaper to create a fiction of "employment".
I don't think it's nearly that clear. Western nations are at a near record low unemployment rate. We should want to remove low paying jobs.
If fast food companies have perfect knowledge of their market, then the immediate job loss would be all that happens, but they don't so it will take some time to adapt to the new market, and see if consumers will bear the increase in cost.
That's not even considering substitutes for labor, which have never been as competitive as they are now. AI, robotics, single-purpose machines, etc. One negative to a minimum wage is that we don't actually know the market price of labor. When there is a shift from humans to machines for labor, it will happen quickly and without warning, rather than slowly as humans become dissatisfied with decreasing wages.
Maybe here this will be offset by decreases in welfare program usage and the very, very high effective marginal tax rates that creates.
With Silicon Valley being in California, one might think this is done on purpose—favoring the automation sector over the wage holders.
Once these companies get some scale in California, they can then drive prices lower to be competitive in other states.
In the end, sacrificing minimum wage workers in California will lead to (generally California based) automation companies taking this revenue across the country.
It's things like self-ordering, machines that make change (if cash handling still matters), conveyor ovens/charbroilers, more centralized food prep, self-service and automated beverage dispensing.
Plenty of automation is happening outside of California though. Here's an Illinois bases company's blurb about beverage automation [1].
Reducing labor in small amounts increases service capacity, and in large enough capacity lets you operate a restaurant with a smaller minimum crew.
[1] https://dimontegroup.com/projects/cornelius-quick-serve-pro/
> It's things like self-ordering, machines that make change (if cash
> handling still matters), conveyor ovens/charbroilers, more centralized
> food prep, self-service and automated beverage dispensing.
Those are things that were previously being done by people that are now being done by machines. In other words, automation.
Actually, a core part of Sweden's original plan for social democracy was to have "solidaristic wage policy" where high wage workers would accept a lower wage in exchange for a higher one for low wage workers. The idea was you'd both squeeze low productivity businesses out _and_ provide a windfall to high productivity ones, who could expand faster.
Start: 100 people paid $100
After minimum wage change: 90 people paid $125, 10 people paid $0
After tax increase: 90 people paid $113 + $12 taxes, 10 people paid $108 from taxes
Now everyone is paid at least as much as they were before, and fewer people are forced to perform labour
In practice it was only 3% unemployment not 10%, which means the tax increase is less and there is more of an incentive to continue working. You can also pay the displaced workers less than their original wage, to reach an equilibrium where everyone is happy with either work+more money, or leisure+less money. Or have it be age-based with an earlier retirement. Or have people work part-time.
We need to stop seeing having a job as being inherently good. Being able to live is good. Humanity should strive for 100% unemployment.
Will I still be allowed to hunt for food?
Society is something better encouraged than gamified.
Well, not maximum wages as policy but policies where high productivity workers take a lower wage than they could individually bargain for in exchange for boosting wages of low productivity workers.
It provides a windfall to the most productive industries and a squeeze to the least productive ones.
Turns out economics is actually more difficult than "higher minimum wage is good/bad".
The unemployment statistics were not influenced by raising the minimum wage here, so you can assume that the people who lost their low paid jobs simply moved elsewhere and got better paid jobs. It's mostly the employers' loss, which is how it should be. If you can't afford to start a business, don't start a business.
It's a 25% higher minimum. It doesn't mean everyone was making the minimum before the law. Certainly not all were. (It would be interesting to know actually how much the wages went up on average.)
Also, do we know if prices went up? Because that could have a negative effect on the rest of the local population.
Second, the effective wage increase for fast food employment was actually quite a bit lower than 25% since several large municipalities had higher minimum wages and not all fast food restaurants were affected.
Third, employment appears to still be dropping.
https://mises.org/mises-wire/racist-history-minimum-wage-law...
It depends on how many hours were worked. Which the paper did not measure.
- Wages often go over or close to the minimum anyway, due to market forces, and do so without costly bureaucracy/enforcement/taxation/distortion
- Minimum wages make everyone whose marginal value is less than the minimum wage unemployable (since you would choose not to hire someone for $20/hour if their marginal value is $15). This is disastrous for someone who'd love to work at $x/hour, but who lives in a state which legislates a minimum wage > $x/hour, since they go from being employed at a low wage to unemployed.
All companies pay people as little as they can to keep a certain amount of employees of certain quality around to do the work. The fewer options you have (or the more options your employer has), the worse the deal you'll have to accept becomes, and the lower your pay will be.
As for skills, I know plenty of people in IT who would go crazy working retail or interacting with customers within a month. Flipping burgers may be the easy part, but resilience against customer behaviour and monotonous/uninteresting work isn't something everyone has.
It is cognitively simple for you, because you aren't thick. But for people of well-below average intelligence, flipping burgers and doing something else at the time is just not possible.
Yes, when there is an shortage or competitive number of low wage workers, not when unemployment rate is approaching 5% overall and close to 20% for low income earning bracket in most places.
People don't work in low income jobs because it is the easiest option, but because it is the only option often.
Which is why the only rational position of a true believer in the free market is to abolish international borders.
> California’s job expansion has continued into its 51st month, with Governor Gavin Newsom announcing that the state created 21,100 new jobs in July. Fast food jobs also continued to rise, exceeding 750,000 jobs for the first time in California history.
> “Our steady, consistent job growth in recent months highlights the strength of California’s economy – still the 5th largest in the entire world. Just this year, the state has created 126,500 jobs – solid growth by any measure.”
This is slightly out of date; California is now the world’s fourth largest economy as of April 2025, passing Japan. I assert the data shows the state does not have a job creation issue.
https://www.gov.ca.gov/2025/04/23/california-is-now-the-4th-...
"A considerable amount of financial support for the Center comes from labor unions: According to federal reports, over the last 15 years it has received nearly $1.2 million in labor funding."
"The IRLE’s highest-profile researcher is Michael Reich, who co-chairs its Center on Wage and Employment Dynamics. Reich made a name for himself at a young age co-founding the Union for Radical Political Economics, with the stated goal of supporting “public ownership of production and a government-planned economy.”"
https://us.fundsforngos.org/news/nonprofit-accuses-uc-berkel... https://epionline.org/release/biased-uc-berkeley-research-te... https://epionline.org/release/biased-uc-berkeley-research-te...
My country switched from 39 to 35 hours maximum working time per week, some years ago, in order to reduce unemployment (we are talking about around 25M workers). The net result was that companies did not hire more people (or less than expected), they figured out ways to make their working force more productive.
> This is disastrous for someone who'd love to work at $x/hour
This does not exist, period. If x is below the cost of housing and eating in the area, it's not worth working, or it is a last ditch job that delays dying on the streets - that's the reality we are talking about. I am pretty sure that the minimal wage they set is just above that, unless I missed the memo and California became socialist.
not really.
If there's a job for cleaning the sidewalk of a joint, or for holding up a sign, but this marginal value is very low, then a minimum wage greater than this value will prevent this productive work from being done (or it'd be done by an existing worker, at the sacrifice of some other productive work they _could've_ done). There's no way to "optimize" this.
Personally i am not a fan of minimum wage. I rather have tax payer money spent on creating valuable workers through training. There's lots of models for such programs - for example, an apprenticeship model, where a firm pays for the cost of an apprenticeship (which includes wages as well as cost of training), in exchange for an agreed upon number of years of employment at an agreed upon fixed wage post-training (they cannot quit or will have to pay back the cost of training for example).
Tax payer?
> in exchange for an agreed upon number of years of employment at an agreed upon fixed wage post-training (they cannot quit or will have to pay back the cost of training for example)
Well I've heard of such model once, a scam school used it for what basically was forced labor. Thankfully the contract was nullified by a court. It's not surprising to me, as I have heard too many stories of harassment and abuse at work.
There's not even a need for that, normal programs such as part-time school, part-time work paid half the minimum wage already exist in my country and are generally appreciated. But they exist mainly for skilled work only, such as engineer positions.
The issue is that you don't need much training for sidewalk cleaning, so "innovative" programs won't solve anything. What is needed is to push back against abusive practices caused by the imbalances of the worker market. Companies are predatory by nature.
By "minimum", do you mean "statutory minimum"? I'm not sure what the policy implication of this argument would be otherwise – an argument against wage and hour enforcement?
It's like thinking you can solve a GPU shortage by giving people more money to buy marked-up GPUs. That won't do anything except make GPUs even more expensive.
The solution is to build more GPUs. To build more housing.
Unless there's something preventing the rich from treating supply as an investment to get even richer off of, increasing production only facilitates wealth collecting at the top.
You're exactly what I was talking about. Indoctrinated into being absolutely opposed to anything in favor of workers, spontaneously regurgitating those same few tired "arguments".
However, the theory always said that a minimum wage rise reduces the number of jobs so it is a strong chance that around 20,000 people were put out of work by this policy.
20,000 people were put out of jobs by employers who didn't want to pay them what they are worth and instead wanted to exploit them. If you can't afford to pay livable wages to your workers, your business shouldn't exist.
Now, for many that’s okay. People just have to be okay that that happens.
Also, now those people affected have no wages.
Nah, most of them are most likely already employed somewhere else at a 25% wage increase.
Note that the unemployment actually didn't spike up according to a different study: https://www.nbcbayarea.com/investigations/california-minimum... so that allows us to assume these people got a better wage somewhere else, at only a marginal increase to the consumer.
We don’t need kids working in coal mines but we also don’t need to make it near impossible for them to get work experience at a part time job because their skill level doesn’t align with $20/hr.
Now if they pay the teenager half the wage the same adult is doing then someone is getting a raw deal.
Said who? The same people who don't pay internships.
> but we also don’t need to make it near impossible for them to get work experience at a part time job because their skill level doesn’t align with $20/hr.
When minimum wage goes up, other more skilled labor also goes up, and adults will go somewhere better paid. Then the business will have no choice but hire the kids at the $20/hr and they will get that work experience you so want to bestow upon them. It's funny you are trying to twist it like it's gonna be a problem to find work experience for the poor poor kids, while all we know the business care about is how to exploit people at the lowest possible pay.
It's always "think of the children" with a specific crowd, an unhealthy obsession with children, I'd say.
Think of the children and ban XYZ books cause poor children can't comprehend what they are reading (allows us to ban books we don't like)
Think of the children and introduce chat control so we can track everybody and monetize their data (allows us to exploit everybody)
Think of the children and don't raise the minimum wage cause poor children can't find internships and part time jobs (allows us to exploit everybody)
There is a pattern here, not sure if you are ready to acknowledge it.
I’d like to see if there’s an increase in GPAs thanks to greater time for studying, or greater fitness from having more time to play a sport and lesser proximity to french fries.
Minimum wage is minimum productivity. If a business is able to increase productivity, they will pay more and fire staff. If they won't then they shut down. And the side-effect, which cannot be measured by economists so doesn't exist, is that some will evade the limit. The theory isn't that minimum wage reduces jobs, it depends in every case...but the best that can be said is that it has no impact.
Card and Kruger, for example, was/is presented as some kind of massive revolution. It is completely useless. Studies concentrate on fast food because it is one of the only sectors that has managed to increase productivity, the wider consequences are ignored. The only reason this industry for DiD minimum-wage papers exist is to give policymakers a button to push when their popularity is collapsing. The idea of the government dictating minimum labour productivity makes no sense (in the US, the policy mix also makes no sense because you have uncontrolled labour supply but the government sets minimum labour productivity...why? It is heaviest incentive for breaking the laws that you set, minimum productivity is set with the knowledge that it won't apply to many people).
You're doing what you disavow here. If it doesn't affect the number of jobs, then it increases the value of that job. If you can sell a carrot for a dollar more, and still sell out of carrots, you have a increased the economic activity without increasing production. The same is true for hours.
This is not about increasing productivity. It's about increasing the share of that productivity that's paid out to workers.
The government deciding the value of X is Y doesn't actually increase the actual value of anything, because that is decided by things the government does not control. Your point about carrots assumes, for some reason that you don't explain, that a firm chooses to sell for a price that is less than market-clearing (this happens all the time with people who make this argument: claims that businesses are both greedy and non-profit maximising). And this model is generally not true of labour either: minimum wage is minimum productivity, that is it, no need to talk about carrots.
Right, and you should be totally clear with people reading your comment: no economic theory supports what you are saying. Wages are productivity, the money to pay wages comes from customers, who choose to pay for something that the worker is producing. Minimum wages do not, and cannot, increase the share of productivity that is paid to workers anymore than the government can demand that shareholders accept lower returns. This is just total economic nonsense.
But more to the point, why do these people obsessed with work and jobs always think anything that creates any kind of job is "good" no matter how bad, dangerous, or poorly compensated? Jobs that amount to licking poison for nickels in a country where you we could probably quarters the lowest currency denomination without issue somehow being "good" for the lockers is ludicrous. Low wages have massive negative externalities for society.
So should a teenager, just entering the workforce, should be paid enough to support a family?
I’d rather sacrifice a living wage for the opportunity of upward job mobility, that’s the metric I really care about. It’s not the job you start with that matters, it’s the job you end with, and how long it takes to get there.
But yes, two teenagers may very well need to support a family. All it takes is one broken condom and being born in the wrong place at the wrong time.
There's not a lot of upward job mobility for most people. We can't all be CEOs. Even if that teenager has aspirations for a bigger career, they'll have expenses like college tuition, books, and travel.
The alternative to low wages isn't necessarily high wages. It could also be zero wages, as the study in the OP demonstrates.
More to the point, not every skill level or job is _worth_ that kind of compensation (as uncomfortable as it might be to entertain), and attempts to circumvent market forces by making lower wages illegal at some arbitrary point have substantially more damaging externalities than 'low wages' -- which are as much a system of slavery as gravity or magnetism, and just as resilient to ideation.
This is a fair stance to take, but you need to accept the consequences of the stance when people get desperate.
> attempts to circumvent market forces by making lower wages illegal at some arbitrary point have substantially more damaging externalities than 'low wages'
A population of people who can not feed themselves are going to kill you on the street for the canned tuna you might have in your bag.
> Having lost a job suddenly, any employment is better than none.
While this is true for you it is not true for the society as a whole.
This entire comment seems be written with a complete disrespect for macro dynamics and taken right out of a hunter gather society.
It completely ignores everything modern governance - and it is quite frightening.
> While this is true for you it is not true for the society as a whole...
Why isn't it? What about using the legal, practical market means at your disposal is exclusive to some privileged section of society, and why does it include me and nobody else in hard times?
Your 'rebuttal' is just a broad, dismissive gesture to theory and platitudinous insults.
In general, though, it wouldn't matter what the minimum wage is if everyone had a sufficient level of general welfare without working...
Which goes to show that rather than minimum wage we ought to have a welbeing floor, perhaps with UBI, perhaps based on keeping key costs, like food, housing, healthcare, and education minimal.
Jobs are a product of the economy. In the end their prices (wages) move with market forces. The only way you deal with scarcity is by increasing supply (i.e. boosting industry), but alas there's always "intellectuals" like you sneering down on it as if people should just choose to die instead.
The Berkeley study has been cited quite heavily by policy makers.
https://irle.berkeley.edu/publications/brief/effects-of-the-...
"A considerable amount of financial support for the Center comes from labor unions: According to federal reports, over the last 15 years it has received nearly $1.2 million in labor funding."
"The IRLE’s highest-profile researcher is Michael Reich, who co-chairs its Center on Wage and Employment Dynamics. Reich made a name for himself at a young age co-founding the Union for Radical Political Economics, with the stated goal of supporting “public ownership of production and a government-planned economy.”"
https://us.fundsforngos.org/news/nonprofit-accuses-uc-berkel... https://epionline.org/release/biased-uc-berkeley-research-te... https://epionline.org/release/biased-uc-berkeley-research-te...
Amazon, giant banks, ExxonMobile, Google, Microsoft, investment firms.
If your concern is only for who the $20 minimum wage was supposed to affect, then there was likely no decrease in jobs based on only that data. However, since causes have effects on more than one intended group, it's very likely that the $20 increase did reduce employment overall and the Berkley study was very careful to downplay that data as not being useful for the purposes of their study, even though they are related. The effects on one part of the industry can affect the rest and to ignore it is a questionable choice.
"...and price increases of about 1.5 percent— or about 6 cents on a four-dollar hamburger."
Ah, yes, the fabled four-dollar hamburger. I know I never need to spend more than 4 dollars nowadays when I get fast food.
Regardless, with the passing of time the adverse effects have worsened to the point that even proponents in Seattle acknowledge there are serious issues that have resulted which need to be addressed.
California looks like it is trying to speedrun Seattle’s mistakes.
It could be that part time positions decreased but full time positions increased, along with hours per job position / total hours / hourly pay and restaurants operated. That’d be a good thing for everyone involved (except maybe the cardiovascular health of the customers), and is compatible with both studies’ conclusions.
In 1992, New Jersey made just such an increase in minimum wage at fast food restaurants. Card & Kreuger ("Myth and Measurement") analyzed data in adjacent areas in NJ & PA. They found that employment in the NJ area actually increased. Take a look at the first chapter of "Economics in America" by Angus Deaton (Nobel 2015).
Comparing CA to elsewhere in the US (where? everywhere?) looks a bit shady. Given the government agencies are being led by political hacks these days, I don't trust it one bit.
I now like to joke that minimum wage laws are subsidies for businesses too dumb to factor in hiring and turnover costs.
If Walmart doesn’t pay enough for its employees to afford to live, then the government steps in with ebt and housing vouchers, etc. to make up the difference.
That’s money Walmart isn’t paying. In fact, they get to kind of double dip. As those employees will likely shop there. So the ebt gets spent there. The government essentially pays Walmart to feed its employees.
The employees are being double hit. Because their income is still taxed, then they essentially get scrip that they’ll likely have to spend at the place where they work.
It’s why you’ll also never see any real movement on the welfare issue. It’s a way to funnel tax money to the rich via poor people.
Some greedy employers will lose an extra butter, a few will fire someone and all employees win.
> all employees win
Without that information, there's nothing to learn here, exception those still employed in the fast food sector now make more money.
Really no. All you have to look at is the number of total jobs and now unfilled jobs. We don’t need to know about the people and them magically becoming CEOs.
And plenty of them are exploited and forced to kickback a part of their wages to the owner. The government does nothing and the owner gets below minimum wage workers.
It’s shockingly common in Canada.
Prices aren’t out of control and service is decent.
That’s how I’ve interpreted it - because otherwise, it makes little sense why the wage for the same work would vary based on the size of the company.
Whenever I pointed how backwards were the tipping expectations in the USA for anyone from Europe, the excuse was always that those tips would compensate the low wages paid in the food industry. Well, now that they have a standard minimum wage, are they doing away with the tipping practice?
More money to spend also creates jobs
Would that be incomplete? Higher minimum wage could cause higher employment in other sectors or raise their revenue and wages.
Imagine doing this analysis on the effects of requiring a business to pay it's slaves, and coming to the conclusion that some slave-based businesses would have to close, since their business model was so skewed, it could only function with slave labor...
Who cares! We don't want a world with companies that can only work with those kinds of business models!
Slave labor shouldn't subsidize artificially low priced products and artificially inflated executive salaries... the end.
One of the reasons why equality is so freaking important for a market economy is because it lets more people participate in it - equality is prerequisite for a market economy (and a democracy, but that is another discussion)
We already have a system for this in theory - the Earned Income Tax Credit. The program use to be widely supported by both Democrats and Republican administrations.
What’s a “living wage” anyway? It’s not the same for a single mother of 3 as it was for my then teenage son.
And I find it rich for people on HN to say that companies that can’t afford to pay its workers are commenting on a site run by a VC fund where almost none of its companies could afford to pay anything if they weren’t being propped up by investors and most of the companies will never make a profit
There is no such thing as a living wage in a housing market like this. The recent bill in WA to control rents limited rental increases to the rate of inflation plus 7% (or a flat 10%, whichever is lower). So when inflation is at 3% every year, and rents rise 10% every year, how long before someone who gets a 5% annual raise (40% higher than the rate of inflation) can't afford rent?
As long as the rental market cannot meet rental demand, raising wages just bids up rents. No more people get housed or are able to create savings to weather emergencies. All that money just gets transferred from business owners to landlords, using minimum wage workers as mules to transport the money.
Your bias is demonstrated by the fact that you seem to think this is all about greedy business owners and you put ZERO responsibility on the landowners and politicians who have perpetuated this housing crisis.
Meanwhile, in states without property tax caps, overheated housing markets raise the property taxes of seniors until they can no longer afford their homes, even if they're paid off. My property taxes are still just a fraction of my mortgage but they've more than doubled in the past 8 years and in another 8 years I'll be 64 and likely pay more annually in property taxes than in mortgage payments.
So seniors and digital nomads sell their ridiculously overpriced homes in superheated markets and take those profits to cooler markets, increasing property values and property taxes, which may seem like a benefit until it heats up the local housing market too much.
But we saw Marc Andreessen and his wife demonstrate their nasty NIMBY values trying to stop a measure increasing housing density in Atherton, California a few years back. The same hero of VC who invested 9 figures in Adam Neumann's housing startup doesn't want any of the plebes it would serve within a bike ride of his home.
It's absurd to see so many commenters, who are probably mostly wage earners, mindlessly repeat the right wing propaganda. Civilization needs some minimum decency.
It's not good for the individuals, but in broader economic terms, an industry that delivered the same value with less people is effectively increasing productivity which is economically generally a good thing. Of course one industry is not a closed system, whether those unemployed people go and contribute somewhere else in the economy or sink into unemployment is a critical question.
If the industry contracted then it's harder to argue it's a good thing.
Not if all (or the vast majority) of the extra value produced is captured by a vanishingly small portion of the population
That is the trend we are following and it is exceptionally bad
I avoid all fast food now except for Chick Filet not due to the food itself, which isn't great but just due to the terrible customer service I get everywhere else.
My kid asked me for McDonalds the other day and for once I said yes, we pulled in at 10:20am and ordered 3 chicken biscuits before breakfast ended at 10:30am. They of course asked us to park and after 15 minutes I went inside and asked what was going on. they apologized and said they were out of chicken as they got a rush when I ordered and it takes 7 minutes to cook. There were a grand total of 4 employees in the store sitting at a busy intersection with a double drive through line and an indoor eating area. Just utter lack of management and employees and customers pay the price.
its 10 minutes before breakfast ends, I'm pretty confident the same rush happens every day at that time. Just such a terrible experience. Definitely saying no next time my kids ask for McDonalds, its not worth 30 minutes of my life to drive through and order a chicken sandwich.
One thing that always seems to be at a disconnect between the economic literature and policy makers is the economic context of the raise in wages. Even those economists that have bought in fully that minimum wage increases don't typically decrease employment will have several caveats to that statement, usually worded in the form of "small increases in the minimum wage". That is to say that there are often small inefficiencies in our current markets which allow employers to reduce wages in cartel-like fashion, and small increases in the minimum wage can claw some of that back in favor of the employees at the expense of employers' economic rents, but not at the expense of economic output. But large increases in the minimum wage absolutely can jump the shark, decreasing economic output by effectively making low margin sectors untenable entirely. If that weren't the case, we would be able to raise it infinitely without any negative effects, which is absolutely absurd (and unfortunately that is the takeaway that ideologues often get from reading abstracts).
A more useful economic model would go a step further than just saying "you can raise the minimum wage without harm to the economy", by incorporating econometric analysis which can accurately predict when and how much you can raise it without incurring economic harm.
Why not $100/hr?
That much is obvious. What is in question is the effects of more realistic minimum wages like this one. Some claim that _any_ minimum wage will only result in deadweight loss, which is true in simplified models, but the effect in the real world is not so clear, hence the need for this type of research.
When government tries to set minimum wages, they often result in job losses (or foregone jobs that were never created) which, as you wrote, is known in economic circles as "deadweight loss."
Fast food is a stepping stone job, and if employeers have to pay more for labor then they will be pickier about it.
Let's think about the reverse. If we cut minimum wage, the sector would be much more loose about hiring first time workers, convicts, or people just not fit for other jobs. The people could grow their skills and contribute more to society, a society where low end business constantly complain about how hard it is to find skilled workers.
High minimum wage contributes to more people on social safety nets living on low fixed incomes because the gulf between that and paid employment becomes too great and there is no low wage on ramp for them.
Why? It would seem to me that there's plenty of room in the balance sheets to just pay people more.
You need a fixed number of people to run a restaurant, there’s only so many positions to be filled. You aren’t hiring on extra people and spending a certain amount on labor, they’ll just pocket any excess.
You can invest in automation but today that’s at a cost higher than paying a living wage and with lower service quality.
What? Just varying restaurant hours changes labour requirements. Menu complexity adds another dimension. Quality of service another. Restaurants are highly variable-cost businesses.