Berkeley study says California's $20 minimum wage raised prices by 3.7%, did not reduce jobs. Critics hit back

This year California dramatically raised its minimum wage for fast food workers from $16 to $20 an hour, the largest single minimum wage increase a state government has ever implemented. Enacted in April, this new law only applies to restaurants that are part of a chain of at least 60 establishments nationwide.

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For advocates, it’s a long-overdue step to help workers cope with the state’s notoriously high cost of living. The average home value in California is $771,057, more than twice the national average, per Zillow. Gas, grocery and other everyday costs also top national averages.

But critics are pouncing on new analysis of the increase that they believe underestimates the impacts on restaurants, employees and consumers.

A separate ballot initiative called Proposition 32 aims to increase the state minimum wage to $18 an hour over several years and was recently deemed too close to call. Counting will continue until early December.

A recent analysis by UC Berkeley’s Institute for Research and Labor Employment concluded the economic impact of a $20 minimum wage is not as severe as critics warned. They found that while average pay of non-managerial fast food workers rose by nearly 18%, it didn't result in job cuts. Fast food prices rose by about 3.7%, or about 15 cents for a $4 item. The study did acknowledge that since consumers absorbed about 62% of the cost increases, "restaurant profit margins likely fell and the royalty fees restaurant operators pay to franchisors likely increased." However, the authors said restaurant profit margins were "above competitive levels before the policy."

"In July, California set a record for the most fast food jobs in state history. Since the law went into effect in April, the state has gained 7,400 fast food jobs," said a press release from Governor Gavin Newsom's office that said the study reaffirmed that the law is helping and not hurting the local economy.

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It's noteworthy that the Shift Project — a joint project between the Harvard Kennedy School’s Malcolm Wiener Center for Social Policy and the University of California, San Francisco — also found that the minimum wage hike had no unintended consequences for staffing, scheduling, or fringe benefits.