What happened after the fast-food pay raise in California? New data explains
Northeastern University research finds higher pay reshaped staffing and employer strategies, highlighting the ongoing debate over minimum wage impacts on jobs and the economy.
Fast-food workers in California may be earning more money, but their employers are cutting their hours to make up for the cost of higher pay.
That’s from a new study published in Applied Economic Letters in early March. Northeastern University postdoctoral research fellow Hitanshu Pandit, who was the author on the paper, used cellphone data to analyze the impact of a law that increased the Golden State’s minimum wage for fast-food workers by 25%.
Pandit found that the 2024 wage hike translated to an average 8% decrease in on-site staffing at California fast-food restaurants – that could have meant fewer workers on the floor, fewer hours offered or a mix of both. In other words, each dollar that the worker’s wage increases results in a 3% reduction in staffing, Pandit found.
The findings could have implications for how fast-food restaurant operators adjust their costs to stay in business. The more employers need to spend on wages could lead to more automation, less quality and fewer job opportunities for teenagers and young workers getting their start in the workplace, to name a few examples, Pandit said.
“You may find a lot more ordering kiosks at Taco Bell or McDonald’s rather than having in-person” staff with whom to place your order, he said.
The intersection of minimum wage and employment is a hot topic in the world of economics. And not everyone agrees on the impact.
“Whether (increasing) the minimum wage reduces employment and by how much literally has spurred hundreds of studies and hundreds of estimates with no real consensus,” said Alicia Modestino, executive director of the Community to Community Impact Lab within the Dukakis Center for Urban and Regional Policy. Pandit is part of this lab.
Modestino said Pandit’s use of “very granular, super detailed” mobile data offers an innovative approach with results that add to the existing literature on the topic.
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The push for higher minimum wages for fast-food workers has held steadfast since the so-called Fight for $15 minimum wage effort in New York in 2012. In September 2023, the Service Employees International Union lauded the passage of California Assembly Bill 1228, or AB-1228, which guaranteed a minimum wage of $20 per hour to fast-food workers starting in April 2024. All other California workers would be subject to the statewide minimum of $16 per hour starting that year, up from $15.50 in 2023.
Only national fast-food chain restaurants with at least 60 locations were affected by the law. Fast-food chains inside grocery stores, hotels and airports did not have to raise their minimums.
The union and other supporters of the law had pushed for a living wage for the nearly half-million fast-food workers in California. At the same time, an independent McDonald’s franchisees group said the law would be a “devastating financial blow,” estimating that meeting the minimum could cost each restaurant $250,000, CNBC reported.
“It’s a very unique policy change,” Pandit said.
That’s why he was interested in looking deeper at the law’s impact. In his study, Pandit used cellphone GPS data to track staffing trends at just over 10,000 fast-food restaurants in California before and after the law went into effect.
Worker shifts were determined through GPS pings that remained at a particular restaurant for at least four hours. Why? Pandit said that using these “long-duration visits” were a reliable way to show employment levels.
Fewer of these “visits” would show that an employer reduced the number of shifts, reduced the number of hours, or a combination.
Pandit compared his findings to similar data from full-dining restaurants that weren’t affected by the law.
After the law’s passage in September 2023, there was a “measurable 8% contraction” in staffing at fast-food restaurants, a trend that continued six months later through the law’s adoption, according to the study.
Pandit pointed to the wide-ranging debate on the minimum wage’s impact on employment by citing other studies that had also analyzed this minimum wage law with findings that there was no change, a modest change or even negative impacts to staffing at fast-food restaurants.
There are a few reasons why the results of these studies vary. For one, it’s a difficult thing to measure, Modestino said.
“We need to have invented a world where the minimum wage did not increase to compare it to,” she said.
Plus, there are many ways that an employer can respond to increased minimum wages, with adjusting staffing levels as one method, making it “hard to gauge how much of a job killer this is,” Modestino said.
Mindy Marks, an associate economics professor at Northeastern University, noted that it was “not surprising that we see employment loss in this sector.”
Employers account for these wage costs by outsourcing drive-thru staff or passing these costs along to customers, she said. It all depends on what the employer is willing to invest in and what the consumer is willing to pay.
Despite the staffing reduction shown in Pandit’s study, raising minimum wages cannot only benefit the employees who remain in the job, but it can also have positive side effects for the economy, Marks said.
Those workers who received a raise are going to be spending their money, and if there is more demand for restaurants or services like beauty salons, that could result in more jobs created, she said.
While the federal minimum wage has stagnated at $7.25 since 2009, more and more states are adopting higher base pay.
As of 2026, a greater share of workers lived in states where the minimum wage is $15 or higher compared to those in states with the federal minimum wage, according to an analysis by the Economic Policy Institute.
The impact of California’s minimum wage increase for fast-food workers would be felt differently depending on the region, Marks said. The cost of living in the Central Valley city of Fresno is different than in the urban metropolis of Los Angeles, where workers may have already been paid close to the minimum regardless.
“The bigger increase in the wage relative to what they were paying before, the more we’re going to see these effects,” Marks said.
