Economists Warned California Against Raising Minimum Wage to $20, but Another Economist Says They’ve Been Wrong in Nearly Every Respect So Far

(SeaPRwire) –   After California enacted a law in 2024 raising the minimum wage to $20 for over 500,000 fast-food employees, Christopher Thornberg, a founding partner at Beacon Economics, issued a warning regarding the state’s decision.

He wrote earlier this year that California’s well-meaning efforts to fix income inequality through wage floors were starting to have a notably negative effect on vulnerable populations, specifically young people from low-income backgrounds.

His worries were shared by fast-food franchise operators, including one who told in 2024 that the increased wages would be impossible to maintain for smaller chains operating on thin margins.

However, nearly two years after the legislation was passed, economists are observing results that contrast sharply with those initial concerns. A working paper published this month by the University of California at Berkeley found that the policy raised average weekly pay for eligible staff by 11% without causing job losses. Menu prices saw a minor increase of approximately 1.5%, which is about six cents on a $4 purchase.

“The results are nowhere as dire as predicted,” Michael Reich, the author of the study and chair of the Center on Wage and Employment Dynamics at UC Berkeley, told .

The research analyzed payroll information from Square and Glassdoor job listings, while also using cell phone location data from Advan Research to monitor customer traffic. Price fluctuations were tracked via DoorDash. This analysis utilized a distinct data set to reach the same findings as previous studies on California’s minimum wage, which also indicated the law had little effect on employment levels, hours, or benefits.

The increase in the minimum wage for fast-food workers is part of a broader debate in California regarding wealth distribution, especially as the wage growth of low-income residents lags behind that of wealthy households. In November, California voters will decide on a ballot initiative to implement a one-time wealth tax on residents with a net worth exceeding $1 billion. A poll conducted last month with the Los Angeles Times showed that 52% of Californians support the measure.

“Minimum wage is by far the most popular issue out there right now,” Saru Jayaraman, president of the national advocacy group One Fair Wage, which is pushing for a $30 minimum wage, told in March. “But the billionaires tax is a close second.”

While the concerns of Californians reflect a national worry about a two-tiered economy, the state serves as a unique economic case study. With a $4 trillion GDP, California’s economy is roughly the size of the United Kingdom’s. Although it is home to over 200 billionaires, the state also has the highest poverty rate in the country at 18%, largely driven by the high cost of living.

Why economists believe panic over California’s minimum wage law was overblown

Reich noted that his research indicates the fears surrounding minimum wage increases are exaggerated. For instance, the 11% wage growth identified in the study is lower than the potential 25% jump from the previous $16 wage. This is likely because many businesses were already paying above the minimum; for example, In-N-Out had a starting wage of $17.50 in 2023, and cities like Los Angeles and San Francisco already had local minimums higher than the state level.

Furthermore, because labor represents 30% of a restaurant’s operating expenses, an 11% wage hike only increases total business costs by 3%. According to Reich, half of this cost is passed to consumers, resulting in the modest 1.5% price rise.

The study even suggested that higher minimum wages might boost revenue for fast-food outlets. Reich pointed out that better pay is linked to higher productivity and decreased staff turnover. Data from the Cornell School of Hotel Administration shows that turnover can cost a restaurant an average of $5,864 per employee, giving companies a reason to retain staff. Additionally, the minor price hike is likely too small for customers to notice.

“When faced with small increases in fast-food prices, [consumers] reduce the amount they spend by an even smaller amount,” Reich said.

Other studies have presented conflicting data. A November 2025 report from the Cato Institute, using Bureau of Labor Statistics data, claimed the fast-food industry lost 18,000 jobs compared to the rest of the market. This research supports Christopher Thornberg’s assertions that higher minimum wages disproportionately affect younger and lower-income workers. Thornberg did not respond to a request for comment from .

A separate November 2025 study from the University of California at Santa Cruz linked the minimum wage law to increased menu prices and a reduction in worker hours and benefits. Reich argued that this research, which relied on interviews with owners and managers, lacked quantitative data.

Reich also mentioned that future data regarding the economic impact of minimum wages might be difficult to isolate due to other policy shifts. For example, a UC Merced study using U.S. Census data found that private sector jobs in California fell by 3.1% following an increase in federal immigration raids, a factor that future employment research will need to consider.

Nevertheless, California’s minimum wage efforts may be starting a national trend. According to a report from the National Employment Law Project, nearly two dozen states and 66 local jurisdictions are set to raise their minimum wages in 2026.

“A lot of people are watching what’s happening in California,” Reich said. “And it could be a model for the rest of the country.”