Econometer: Is the negative effect of the $20 fast-food minimum wage overblown?

Phillip Molnar, The San Diego Union-Tribune on

Published in Business News

Earlier this month, California fast-food workers started earning a $20 an hour minimum wage. The law applies to restaurants offering limited or no table service and which are part of a national chain with at least 60 establishments nationwide.

Proponents of the bill, and many fast-food workers, say the increase will help them pay bills, rent and other expenses in the state's most expensive areas, like San Diego.

Opponents have argued wage gains will be passed to consumers, worker hours will be cut and some franchisee owners say they might shut down. However, research from economic professors at UC Berkeley and the University of Victoria argues the data from past minimum wage gains hardly affected fast-food chains, helped retain workers and price increases were marginal.

They found every dollar increase in the minimum wage in California and New York led to an increase of the Big Mac by 12 cents, which researchers said was very small compared to what some opponents argued would happen.

Q: Is the negative effect of the $20 fast-food minimum wage overblown?



Alan Gin, University of San Diego

YES: There is significant economic research that shows that raising the minimum wage has minimal, if any, negative impact on employment. Part of the increased costs may be passed on to consumers through higher prices, with some estimates putting that at about 5 percent, or $0.50 for a $10 meal. The benefits of the increase include helping low-wage workers make ends meet, reduced poverty, especially for children, more tax revenue and lower aid expenditures for the state, and reduced racial inequality.

James Hamilton, UC San Diego

NO: These are temporary jobs for people who need them. A recent survey found 1 in 8 Americans had worked for McDonald's at some point in their lives. Now fewer of these jobs are going to be available in California. We'll see some franchises close and fewer new ones get started. Restaurants that stay will automate more jobs and charge higher prices. Chalk 2024 up as another year when California has a higher inflation rate than the rest of the country.


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