Conflicting studies obscure the realities of fast-food wage battle in California

The debate is picking up steam as the Fast Food Council, an entity created to oversee pay and working conditions, ponders a new effort by unions to boost the minimum wage even higher.

First, a brief history.

In 2022, the Legislature passed and Newsom signed a union-backed bill that would have raised the fast-food minimum wage to $22 an hour and declared that fast-food franchises are merely subsidiaries of the parent chains, rather than independently owned businesses.

The industry disliked the wage increase but loathed the challenge to the franchise system and responded with a referendum to overturn the law. However, a multimillion-dollar ballot battle was averted in 2023 with compromise legislation. It mandated a $20 minimum wage and set aside the franchise status issue, but retained creation of the Fast Food Council. The new wage went into effect last April and the conflict continued with ongoing debate about the law’s effects.

Proponents have cited multiple studies by academics at Harvard, UC San Francisco and UC Berkeley contending that the wage hike has had minimal, if any, negative effects.

“We find that the policy increased average hourly pay by a remarkable 18%, and yet it did not reduce employment,” a study by the UC Berkeley Institute for Research and Labor Employment concluded. “The policy increased prices about 3.7%, or about 15 cents on a $4 hamburger (on a one-time basis), contrary to industry claims of larger increases.”

In October, Newsom declared that “This study reaffirms that our commitment to fair wages for fast-food workers is not only lifting up working families but also strengthening our economy. The data shows that investing in workers benefits everyone — workers, businesses and our state as a whole.”

However, both the UC Berkeley labor center and Harvard’s Malcolm Wiener Center for Social Policy lean to the left, and the fast-food industry dismisses their studies as biased.

In January, an industry coalition called Save Local Restaurants sent a letter to Newsom declaring that “an additional wage increase would once again unfairly single out our livelihoods and cripple thousands of small business owners like us who are already struggling to survive the $20/hour minimum wage, our customers and our employees.”

On Tuesday, the industry released its own impact study, conducted by the Berkeley Research Group, a private consulting firm. It found that wage increases have reduced fast-food employment, shortened the hours worked, compelled fast-food franchises to use more automation and resulted in markedly higher consumer prices.

Both pro and con studies used roughly the same employment data generated by the federal Bureau of Labor Statistics. The agency does not collect specific data on the fast-food chains affected by the minimum wage legislation, so the rival researchers had to extrapolate what they contend are valid statistical bases.

The situation cries out for some truly objective research into this experiment in industry-specific wage-setting. It could be extended to other economic sectors, but without some reliable data on effects, everyone involved is shooting in the dark. It will be politics, rather than fact, which governs the outcomes.

Dan Walters has been a journalist for more than 60 years, spending all but a few of those years working for California newspapers. He began his professional career in 1960, at age 16, at the Humboldt Times. CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics. He can be reached at dan@calmatters.org.