California Governor Touts Fast Food Job Growth With Higher Minimum Wage

As California considered and then mandated a minimum wage raise at most fast-food restaurants, opponents warned the controversial legislation could be a job killer. On Tuesday, before appearing at the Democratic National Convention, Gov. Gavin Newsom highlighted new employment data pointing to a different picture: a growing industry.

Quick-service restaurants have consistently added thousands of jobs every month this year in California, reaching a record employment total of 750,500 in July, according to preliminary data released by the U.S. Bureau of Labor Statistics. The figures show 11,000 additional fast-food jobs since April, when the wages were hiked to at least $20 per hour.

“What’s good for workers is good for business, and as California’s fast food industry continues booming every single month, our workers are finally getting the pay they deserve,” Newsom said in a statement. “Despite those who pedaled lies about how this would doom the industry, California’s economy and workers are again proving them wrong.”

Newsom’s comments are the latest salvo in the closely watched wage bump for hundreds of thousands of fast-food employees. Newsom signed the increase into law last September. The legislation also created a first-of-its-kind Fast Food Council that allows workers to participate in the development of job standards. The council’s nine voting members can increase the hourly minimum wage by up to 3.5% annually.

Critics of the state law, which only applies to chains with more than 60 stores nationwide, argue that employers have cut employee hours and jobs to cope with more expensive payroll costs. They argue that a separate BLS jobs data set is more reliable because it’s adjusted for seasonal economic influences, and it shows gains of just hundreds of jobs in the industry since April.

Most of California’s fast-food employees are adult women of color who previously made close to $16 an hour, the state’s general minimum wage, according to the UC Berkeley Labor Center. Increasing their ability to afford food, rent and other basics will improve their family’s lives and decrease reliance on taxpayer-funded aid programs, the law’s proponents argued.

Economists contacted by KQED agreed that more evidence is needed to assess the full impact of the wage increase.

Michael Reich, who chairs the Center on Wage and Employment Dynamics at UC Berkeley, said that higher wages could attract more workers to fast-food jobs, which traditionally have high turnover rates. He believes the job figures celebrated by the governor represent the best evidence yet that the industry is growing.

“I don’t think minimum wage (increases) kill jobs; I think they kill job vacancies,” Reich said. “When the minimum wage goes up, more workers are attracted to those jobs and they are more likely to stay in them. The numbers do show that wages can be much higher, and yet the business can do well, and workers can do well.”

Reich’s preliminary research suggests that McDonald’s restaurants increased hamburger prices by less than 2% in California after the minimum wage increase.

Most fast-food restaurant owners are franchisees who pay large corporations such as Wendy’s or Taco Bell to represent their brand. A spokesperson with the International Franchise Association, a trade group representing fast-food franchisees and franchisors, said the net job data is misleading. The organization, which fought the raise, has warned that it would hurt small business owners, workers and consumers.

“Every day you see headlines of restaurant closures, employee job losses and hours cut, and rising food prices for consumers,” the spokesperson said in a statement. “Local restaurant owners in California are already struggling to cope with the $20/hour wage, as the Fast Food Council considers additional wage increases. All the while, workers and consumers are feeling the pinch.”

Rebekah Paxton, research director for the Employment Policies Institute, a nonprofit research organization funded partly by the restaurant industry, said seasonally adjusted employment bureau figures reflect a more reliable picture. According to that BLS data, fast-food jobs decreased statewide by 2,700 between January and July but increased by about 400 since April.

Paxton pointed to her organization’s recent survey of more than 180 fast-food operators in California, which found most have trimmed staff and cut employee hours while raising consumer prices.

“This is certainly not the rosy picture that the governor is portraying,” Paxton said. “Fast-food restaurant employment is stagnating and even going down. There’s a trend that is getting worse as this minimum wage policy continues.”

Even with some job losses, the new minimum wage has not materialized the catastrophic impacts on employment opponents predicted so far, said John Logan, the director of labor and employment studies at San Francisco State University.

“For the most part, it’s good news for supporters of the legislation. There’s no evidence of a disastrous impact on jobs,” Logan said. “In fact, the signs seem to be that the California fast food sector is continuing to grow.”