Published
October 02, 2025
In 2023, the State of California passed a measure known as AB 1228, which increased the minimum wage for fast-food workers from $16 to $20—a whopping 25% raise. At the time, critics predicted the move would have a negative impact on employment based on the basic economic principle that raising the price of something (in this case labor) reduces demand. It turns out the critics were right.
A study published recently by three economists and issued by the National Bureau of Economic Research (NBER) underscores the point. The report found that California’s misguided experiment led to a 3.2% decline in fast food employment when compared to other parts of the country, which translated to 18,000 lost jobs.
The California rule took effect in April 2024 on fast-food chains with at least 60 locations nationwide. The authors of the NBER report, which included economists from Texas A&M and the University of California, San Diego, observed that “this is one of the largest one-time minimum wage increases in United States history and one of the few focused on a single industry in recent decades.”
The report found that using unadjusted data “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. Adjusting for pre-AB 1228 trends increases this differential decline to 3.2 percent.”
In fact, the report opined that “[f]ollowing AB 1228’s enactment, employment in the fast food sector in California fell substantially, with estimates ranging from 2.3 to 3.9 percent across specifications, even as employment in other sectors of the California economy tracked national trends.”
The bottom line is, as critics of AB 1228 noted, increasing the minimum wage has an economic impact—namely, it reduces jobs. After all, employers do not have limitless resources (i.e., income) to sustain massive, double-digit percentage increases in wage costs.
Thus, employment by necessity was bound to be negatively impacted by California’s ill-begotten measure. Politicians in other locales would do well to absorb this lesson before considering similar proposals.
About the author
Sean P. Redmond
Sean P. Redmond is Vice President, Labor Policy at the U.S. Chamber of Commerce.
