With California’s recently enacted $20 minimum wage for fast-food workers now in effect, we will soon see who was right — advocates of the law who hailed it as a victory for workers struggling to make ends meet or opponents who said it would lead businesses to cut workers’ hours, replace them with machines and do less hiring.
Most of the scholarly research on minimum wage increases has shown mixed results. A 2023 analysis published in the Journal of Economic Perspectives reviewed more than 200 studies and found that minimum wage increases typically lead to higher incomes for low-wage workers without major job losses. But that’s only for moderate increases.
The effect on jobs can change considerably depending on the size of the wage increase and the industry involved. Large, rapid hikes can have unintended consequences, including reduced hours, increased automation and even business closures, that study found.
California’s $20 wage hike for fast-food workers, implemented in April 2024, is one of the steepest in the nation. That could leave the fast-food sector with fewer positions, according to a report by Edgeworth Economics.
Other states like New York and Washington, which also implemented high minimum wages, reported reduced employment opportunities in the sectors that saw the minimum wage increases. And the rapid pace and scale of California’s increase could be amplifying those effects.
A recent survey from the California Restaurant Association found that 89% of fast-food operators reduced employee hours in response to higher labor costs, and 35% cut back on benefits like paid sick leave or health coverage.
This suggests that while hourly wages rose, overall worker income and job quality may not have improved as much as intended. Businesses also responded by increasing menu prices, with chains like Chipotle raising prices by 6-7% in California locations. That price inflation can reduce customer traffic, indirectly affecting workers’ job security.
It’s important to take that with a grain of salt, though, because the restaurant association is surveying the business owners who actively lobbied against the legislation and spent millions of dollars to influence public opinion, arguing that it would hurt small business owners and lead to job losses and higher prices.
But even taking the views of business owners on paying higher wages to workers out of it, there’s another critical factor: automation. Rising labor costs often encourage businesses to adopt labor-cutting technologies, research from the National Bureau of Economic Research shows. In fast food, this could mean ordering kiosks, more pre-prepared items and streamlined menus, all of which reduce the number of entry-level jobs.
These national trends highlight a difficult balance: raising wages to a livable standard is essential, but if done too quickly or without supporting measures, the result can be fewer jobs and less income stability for the very workers minimum wage laws aim to help.
For South Los Angeles, a community with a poverty rate double the city average and where roughly 35% of workers earn wages near or below the new minimum, these findings are particularly relevant. Policymakers and community leaders must consider bringing in additional strategies — such as subsidized child care, affordable housing initiatives, and workforce development programs — to offset the potential negative impacts on employment and family stability.
Additionally, small businesses in South L.A. may face greater challenges than national chains in absorbing wage increases. Unlike large corporations, many neighborhood restaurants and shops operate on thin margins that don’t leave a lot for owners after all the bills are paid, and may struggle to pass on increased costs or invest in automation.
Support in the form of low-interest loans, tax credits and business assistance programs could be critical in preventing closures and preserving jobs.
Ultimately, the promise of minimum wage hikes lies not just in raising hourly pay but in improving the overall quality of work and economic security for L.A. residents. This requires thoughtful implementation backed by data-driven policies that address the complex realities faced by workers and employers alike.
California’s bold step is a real-world, right-now experiment. The results will shape wage policy nationwide. For workers in Los Angeles, it’s a reminder that economic progress depends not only on raising wages but on building resilient, supportive systems that allow workers and businesses to thrive together.
Dion Rabouin is The Wave’s new business and digital editor. Feel free to send suggestions and story ideas to Dion@wavepublication.com.
