Study Finds California Fast Food Workers May Not Benefit From $20 Wage

California’s fast food minimum wage hit $20 an hour in April 2024, covering employees at franchise restaurants with 60 or more locations statewide. The increase was one of the most closely watched sector-specific wage laws in the state, and it drew national attention. Two years in, a working paper from UC Santa Cruz is raising questions about whether the policy is delivering on its core promise.

UC Santa Cruz economics lecturer Stephen Owen led the study with a team of undergraduate researchers. They reviewed financial records, hiring data, and operational details representing more than 100 franchise locations across California. Their goal was to understand how businesses and workers have actually adjusted since the law took effect, going beyond the back-and-forth between labor unions and business groups that has dominated coverage of the policy.

“Based on what we’ve found, I think this legislation is a classic case of ‘no good deed goes unpunished,'” Owen said, adding that the results have not been as positive as policymakers expected. A wage increase that looks straightforward on paper has produced a more complicated picture for the workers it was meant to help, and the study examines the reasons behind that gap.

Higher Hourly Pay Hasn’t Translated Into Higher Earnings for Many Workers

One of the clearest findings in Owen’s research involves a mismatch in the labor market. Fast food jobs have become significantly more attractive since the wage increase, and the data from a Burger King franchise operating more than 50 California locations showed applications spiked by 400% in August 2024 compared to the same month in 2023, with elevated numbers continuing into early 2025.

At the same time, the same Burger King franchise group recorded a more than 21% decline in shift hours at coastal locations between October 2023 and October 2024. Some of those hours were partially restored by 2025, but total hours remained below 2023 levels. The pattern shows more workers competing for jobs that, in aggregate, may offer fewer total hours than before the law took effect.

Across 18 McDonald’s franchise locations in California’s Central Valley, total labor hours fell by nearly 12% over two equal 12-month periods spanning April 2023 to March 2025. Owen’s team calculated that the decline was equivalent to roughly 62 full-time positions for a year. The researchers also found that many franchises have eliminated overtime, which had been an important way for longer-tenured workers to meaningfully increase their take-home pay.

Fast Food Businesses Are Raising Prices and Leaning on Automation

Beyond cutting hours, Owen’s team found that franchise owners are adjusting in other ways. The wage increase raised labor costs by roughly 25%, which Owen estimates could push overall operating costs up by about 9% if businesses make no other changes. Menu prices at franchised restaurants have climbed approximately 8 to 12% since September 2023, a figure the researchers attribute to a combination of labor costs and broader inflationary pressures.

Since fast food is often considered an “inferior good,” meaning lower-income consumers rely on it more heavily, Owen notes that price increases tend to hit that group hardest. One Northern California Burger King franchise owner told the research team they planned to close the lowest-performing 10% of their locations over the next two years. The industry’s notoriously tight profit margins leave little room to absorb sustained cost increases.

Automation is also accelerating. Burger King, McDonald’s, and Taco Bell franchises reviewed by the team had all invested in self-service kiosks, and some locations were piloting AI voice ordering and automated dishwashing. Owen acknowledged that some technology adoption in fast food would have happened regardless of wage policy, but said the pace has been accelerated by the cost pressure. “The industry is really ripe for automation,” he said, noting the long-term job loss implications are significant.

A Different Study Reached the Opposite Conclusion

Owen’s study does not stand alone in the conversation. A September 2024 report from the UC Berkeley Institute for Research on Labor and Employment reached a notably different conclusion, finding the wage increase boosted worker pay without causing significant job losses and resulted in only slight price increases. The Berkeley researcher, when contacted for comment on the Santa Cruz findings, said he stood by the earlier results.

The Berkeley researcher said the study accounted for seasonal shifts and fast food demand patterns, and was careful to distinguish correlation from causation. An updated version of that research was also described as forthcoming, with findings expected to support the original conclusions. The two studies cover the same policy period and reach opposite conclusions, leaving the broader debate unsettled.

Owen’s broader takeaway challenges the premise of the policy itself. He argued that sector-specific minimum wage increases can create incentives for workers to enter industries with limited upward mobility, and that other approaches, including targeted income assistance and business deregulation, might do more to help low-income Californians. The UC Santa Cruz working paper has not yet been peer-reviewed. Whether lawmakers revisit the policy, the study adds a data point that is difficult to set aside.