A University of California, Berkeley, study trumpeted in the media doesn't say what the press release claims.
reason.com/video
After California's $20 minimum wage for fast-food workers went into effect in April, some economists expected affected restaurants to cut jobs. So what actually happened? They not only added workers but did so at a faster pace than fast-food restaurants in the nation as a whole—or at least that was the claim of a research paper by two labor economists at the University of California, Berkeley, and the University of California, Davis.
If you actually read it, you'll find that the results celebrated in the press release and echoed by the media aren't in the paper. In fact, it barely addresses the effect of the minimum wage increase on fast-food employment in California. It offers no numbers and no models. There's no evidence that fast-food jobs increased after the law was implemented.
The paper's findings were trumpeted as evidence that government-mandated wage increases have no adverse effect and that we should be raising the minimum wage higher and in more places.
The main objection to high minimum wages is not their effect on overall employment, prices, or profits—it's the fear that they cut off the bottom rungs of the economic ladder for low-skill workers. Instead of being able to work at low wages while improving job skills and making contacts for advancement, they are forced into the underground cash economy or public assistance. Therefore studies of these laws should focus on the effect on these low-skill workers, not on economic aggregates.
The correct way to study the impact of the $20 minimum wage is to see what happened to fast-food workers who were earning less than that amount before April 1, 2024. How many had their pay raised and hours maintained? How many lost their jobs or lost hours, and what did they do afterward? Were low-skill workers able to compete for the new job openings after the law's implementation?
If minimum wage increases were a drug, governments would have to conduct trials and monitor adverse effects afterward. That's what happened in Seattle when it raised the minimum wage in 2014. The city called for proposals to study the impact on actual workers earning below the minimum before the law. The Evans School of Public Policy and Governance at the University of Washington was the only volunteer. Its researchers found that the law didn't cause an increase in layoffs among workers who had previously earned below minimum wage, but it did reduce their hours by an average of 7 percent. That was partly offset by a 3 percent increase in hourly pay for the hours they did work. On net, the law cost these workers an average of $888 per year.
That amount is significant in itself, but it's important to consider that it accounts for only the short-term effects. As mentioned above, some layoffs and hour reductions will happen immediately, but others—such as more businesses closing and fewer opening, or automation and other changes reducing employment—can take years. Another point is that the workers who benefited from higher pay were the ones most likely to have risen out of the minimum wage ranks to the middle class even without a mandated increase, while the workers who lost much more than $888 per year are more likely to be the ones blocked forever from economic advancement. In fact the paper found that the workers who benefitted net were the most experienced and highest paid among the group–earning more than the old minimum but less than the new–while the less-experienced workers earning the old minimum or close to it, lost considerably more than the average.
Seattle legislators must have been unhappy with those findings because they cut funding for the Evans School and reached out to the same group at U.C. Berkeley that did the California minimum wage study to do its own distorted analysis, which was rushed out a week before the Evans study was made public. Eventually, Seattle raised the minimum wage again.
These studies aren't about the search for truth with statistics; their purpose is to score political points, with little regard for the low-skill workers whose lives are directly impacted.
Video Editor: Adani Samat
Audio Production Ian Keyser
Color Correction: Cody Huff
#jobs #workers #california #minimumwage