Two years after Democratic Governor Gavin Newsom signed the FAST Recovery Act, California’s ambitious $20 minimum wage for fast-food workers is showing unintended consequences that critics warned about from the start.
According to the Employment Policies Institute (EPI), the state has lost nearly 20,000 fast-food jobs since the law took effect—accounting for roughly one-quarter of all fast-food job losses nationwide. Nationally recognized chains, including Pizza Hut, have cut staff, with the franchise laying off 1,200 delivery drivers to manage costs. Smaller chains, such as Mod Pizza and Foster’s Freeze, have shuttered locations entirely.
The law, designed to provide “living wages” to fast-food employees, has in practice priced some workers out of jobs and forced others into reduced hours. EPI reports that remaining workers are losing, on average, 250 hours annually—a shortfall equivalent to roughly $4,000 under the previous wage structure.
“Newsom’s $20 wage has turned out to be nothing more than a boost to his own ego at the expense of fast-food workers,” EPI analyst Rebekah Paxton told The Washington Examiner.
While the governor initially celebrated the legislation for its supposed economic and social benefits, the reality has been starkly different. Families of laid-off employees are now grappling with lost income, and surviving employees are facing decreased hours and earnings, the very outcomes the policy sought to avoid.
Small businesses, analysts warn, are bearing the brunt of the policy. Unlike national chains, which can absorb higher labor costs, smaller operators often cannot sustain the financial pressure, leading to closures and market consolidation. The American Cornerstone Institute (ACI) noted that the law disproportionately benefits large corporations at the expense of smaller competitors.
“Unlike their multinational competitors, small businesses have a tougher time absorbing the increased costs of labor, leading to further consolidation of capital in the hands of the largest corporations,” ACI explained. “Applying a uniform wage across a state as large and economically diverse as California creates profound distortions. Costs of living in San Francisco, for example, are dramatically higher than in rural areas, yet businesses in both areas are forced to adhere to the same wage rates.”
Critics argue that the legislation was less about helping workers and more about political signaling. Conservative commentators predicted job losses and economic disruptions from the outset, concerns that are now reflected in the data.
As California continues to navigate the fallout, many families and small business owners are left confronting the consequences of a well-intentioned but economically disruptive mandate. For those affected, the warning signs offered by policy analysts may offer little consolation in a labor market reshaped by the state’s high-profile experiment.
