California’s $20 Fast Food Minimum Wage Law Is Already Causing Major Problems

California has once again taken the lead in imposing impractical wage laws, with the state recently raising the hourly minimum wage for fast food workers to $20. Governor Gavin Newsom justified the increase by stating, “We saw the inequities….We had a responsibility to do more.” This move came after unions lobbied for the higher minimum wage, and in states run by Democrats, unions often get their way.

CNN celebrated the change, announcing that “Half a million California fast food workers will now earn $20 per hour.” Meanwhile, progressive think tanks like the Center for American Progress echoed the sentiment, claiming, “A higher minimum wage would boost millions of families out of poverty and further stimulate the economy.” This paints a rosy picture of a perfect cycle where everyone wins.

However, if raising the minimum wage is such a surefire success, why stop at $20? Why not raise it to $30, $50, or even $100 per hour? The reality is that government-mandated wage increases are far from a win-win scenario. They often lead to unintended and harmful consequences, a principle well-articulated by economist Frederic Bastiat in his essay “That Which Is Seen, and That Which Is Not Seen.” Bastiat argues that government intervention in economic decisions often has immediate, visible benefits but ultimately leads to detrimental, unseen consequences.

One immediate and visible consequence of the wage hike is that existing workers get a raise. This is what the media, unions, and progressive think tanks highlight. But the unseen effects are more significant and far-reaching:

1. Job Losses and Reduced Hours: Thousands of Californians have already lost their jobs due to restaurant closures. Others have seen their hours cut as businesses try to manage the increased labor costs. For instance, the fast food chain El Pollo Loco reduced employee hours by 10 percent. Pizza Hut announced layoffs for over a thousand delivery drivers. One such driver, Michael Ojeda, questioned the benefit of a wage increase when it leads to job losses, asking, “What’s the point of a raise if you don’t have a job?”
2. Increased Automation: With higher wages, employers are more motivated to automate their operations to save costs. Chipotle, for example, has developed a robot that makes burrito bowls. Even CNN noted that some restaurants are replacing fast food workers with kiosks. This shift towards automation means fewer job opportunities for workers in the long run.
3. Rising Prices: The day the wage increase was signed into law, Newsom was asked if Californians could expect higher prices at McDonald’s and Starbucks. He dismissively replied, “I’ve heard that rhetoric before. And it didn’t happen!” Yet, this claim is false. Price hikes are an inevitable consequence of forced wage increases. Starbucks prices have risen by as much as 15 percent, costing customers about $200 more per year for their coffee. Similarly, the price of a chicken burrito at Chipotle has increased by up to 8 percent.
4. Impact on Young and Unskilled Workers: Perhaps the most damaging unseen effect of minimum wage laws is the reduced opportunities for young and unskilled workers. These individuals often struggle to find employment as higher wages make employers more selective. In 2014, when Seattle raised its minimum wage to $15, young workers experienced reduced job opportunities and hours. Rigel Noble-Koza, a teenager at the time, noted, “If I cost more, why would a company take a risk on hiring me? They’ll hire the worker with more experience instead.” Dillon Hodes, another teenager, observed that his friend lost hours because she was young and inexperienced.

These anecdotes highlight a broader economic truth: government-imposed price controls, such as minimum wage laws, ultimately harm the very people they are intended to help. Instead of lifting families out of poverty, these laws can result in job losses, reduced work hours, increased automation, and higher consumer prices. They particularly disadvantage young and unskilled workers, depriving them of the opportunity to gain valuable experience from entry-level jobs. If only policymakers would consider the broader economic impacts and the lessons from economists like Bastiat, they might avoid such counterproductive interventions.