How's that $20 minimum wage for fast food workers working out in California? Today Michael Hiltzik points to a couple of new studies that have some early data.
Both conclude, unsurprisingly, that wages have gone up for fast food workers. But what about prices and employment?
The first study, from the Institute for Research on Labor and Employment at Berkeley, says the law increased prices to consumers by 3.7%—or about 50 cents for an average burger & fries combo.
On employment, unfortunately, the report seems to have misidentified its own data. It compares California employment to US employment and says that starting in 2024 "California fast food employment begins to grow faster than U.S. fast food employment." But their own chart shows just the opposite. Here's a clearer take on the data:
California employment in fast food relative to the US has been declining since the start of 2023. As it happens, though, the report's overall conclusion of no effect is probably correct anyway: the decline is relatively steady and nothing special happened when the $20 wage took effect. On the other hand, there is a drop from April to June, equal to about 10,000 workers. It's possible this is due to the new law taking effect, though it looks mostly like noise to me. Time will tell.
The second study comes from the Harvard Kennedy School, but it relies on a self-selected sample from Facebook and Instagram. Based on their latest wave of survey results they conclude that average hours worked hasn't changed, but they have no way of estimating total employment. So it's of limited use.
Nickel summary: California's $20 fast food law raised wages considerably and prices a little bit. It probably had no effect on employment, but it's too soon to tell. There might have been a small effect.
I'm reminded of Jesse Watters on a podcast six months ago: "If you're making $20 an hour to work at a fast-food restaurant ... is that six figures?" Told that it actually equates to 40K, he said, "So, if your husband or wife is also there, you're making $100,000 as a family."
Jesse Watters, noted advocate for polygamy/polyandry.
i'm guessing he was trump's in-house vote counter in 2020
According to that chart the decline in California employment in fast food relative to the rest of the country starts in August-September 2022, not early 2023. So there's a lot of misunderstanding of data going around.
Loathsome neoliberals have always claimed that marginal increases in the minimum wage will devastate the people the increases were intended to help. Never seems to happen. Remember this blast from the past:
https://slate.com/news-and-politics/2015/04/the-fight-for-15-its-a-bad-idea-raising-the-minimum-wage-to-15-would-hurt-millions-of-vulnerable-people.html
and they’ll still vote for trump… or just don’t care to vote at all.
It may be as simple as not replacing workers who leave/die as fast.
Fast food is already based on using the lowest possible labor hours using the cheapest/lowest possible skill level employees. The McDonald's near me (not in CA) recently eliminated ordering from a human (which had already been automated ordering down to the employee only pushing a button to order each item decades ago) in favor of using big touch screen menus or doing it with an app or something. I don't think there is a way to order from a human.
Their % of labor cost vs revenue has probably steadily gone down over the years as they have introduced changes to their already as low as possible labor cost model. A higher minimum wage no doubt adds an additional incentive, but that was already the original model and they have been working on lowering it for their entire existence anyway.
At least one McD's in CA has moved aggressively to the kiosk in place of ordering from a human. However, exceptions need to be made for folks like myself who want to get the senior discount. The kiosk doesn't support that. In fact, I was informed by one cashier that the kiosk used to have an option to specify senior discount but it was removed. No surprise there, as the kiosk can't validate your age and so lots of non-seniors were taking advantage of that option.
Haven't been in a McD's since forever (coastal elite here, in need of some literal belt tightening 🤣 ) but I find it hard to believe 3.7% equates to 50 cents on a fast food meal. Clicking through the study says it's 15 cents, so that makes a lot more sense.
That jumped out at me too. If 3.7%= $0.50, then 100%=$13.51, which seems awfully expensive for a burger and fries. On the other hand, if 3.7%=$0.15, then 100%=$4.05, which seems low.
Its a combo meal so that' s burger, fries and a drink. The study says the initial price for the combo was actually $13.44 which is close enough to what you reverse engineered.
I'm too lazy to look up the definition of "fast food", but if it is has stayed consistent then Kevin's analysis is correct. Another factor to consider is any change in the number of fast food establishments in California as a share of the national count.
Personally, I'll take a food truck over a chain any day. Does that count as fast food?
How is the company behind the Pasadena robot burger place doing?
My experience was
- the fries (robot cooked) were VERY good
- the burger (also robot cooked) was mediocre, but I fault that more to the “design” of the burger - too much lettuce, not enough cheese
Point is, I could see this working in principle if the wages rise too high…
Of course we don’t know the background costs (how often does the machine develop problems, how much work to clean it, etc etc)…
Gotta love the implicit threat -- watch out proles, name99 is gonna replace you with robots if you get uppity.
Should your line be when the law goes into effect or when the bill/law is passed and the industry knows for certain that (near) future labor costs will increase?
Newsom signs the bill late September 2023. Give time for adjustment and it fits the data more than the way you've set things up with the line drawn when it goes into effect. Firms are forward looking.