Corporate Fearmongering Over Fast Food Wage Hike Aged Like Cold French Fries

Janine Jackson

Conor Smyth (FAIR.org, 1/19/24): " The history of debates over the minimum wage is filled with claims about the detrimental effect of raising the wage floor that have repeatedly flopped in the face of empirical evidence."

In September 2023, California passed a law requiring fast food restaurants with more than 60 locations nationwide to pay workers a minimum of $20 an hour, affecting more than 700,000 people working in the state’s fast food industry.

Readers will be unsurprised to hear that corporate media told all us that this would devastate the industry. As Conor Smyth reported for FAIR (1/19/24) before the law went into effect, outlets like USA Today (12/26/23) and CBS (12/27/23) were telling us that, due to efforts to help those darn workers, going to McDonald's or Chipotle was going to cost you more, and also force joblessness. This past April, Good Morning America (4/29/24) doubled down with a piece about the "stark realities" and "burdens" restaurants would now face due to the law.

Now we have actual data about the impact of California’s law. Assessing the impact, the Shift Project (10/9/24) did "not find evidence that employers turned to understaffing or reduced scheduled work hours to offset the increased labor costs." Instead, "weekly work hours stayed about the same for California fast food workers, and levels of understaffing appeared to ease." Further, there was "no evidence that wage increases were accompanied by a reduction in fringe benefits… such as health or dental insurance, paid sick time, or retirement benefits."

Judd Legum (Popular Information, 12/3/24): "the restaurant industry provided a distorted picture of the impact of the fast food worker wage increase."

In June 2024, the California Business and Industrial Alliance ran a full-page ad in USA Today claiming that the fast food industry cut about 9,500 jobs as a result of the $20 minimum wage. That’s just false, says Popular Information (12/3/24).

Among other things, the work relied on a report from the Hoover Institution, itself based on a Wall Street Journal article (3/25/24), from a period before the new wage went into effect, and that, oops, was not seasonally adjusted. (There’s an annual decline in employment at fast food restaurants from November through January, when people are traveling or cooking at home—which is why the Bureau of Labor Statistics offers seasonally adjusted data.)

The industry group ad starts with the Rubio's fish taco chain, which they say was forced to close 48 California locations due to "increasing costs." It leaves out that the entire company was forced to declare bankruptcy after it was purchased by a private equity firm on January 19, 2024 (LA Times, 6/12/24).

As Smyth reported, there is extensive academic research on the topic of wage floors that shows that minimum wage hikes tend to have little to no effect on employment, but can raise the wages of hundreds of thousands of workers (CBPP, 6/30/15; Quarterly Journal of Economics, 5/2/19). Media’s elevation of anecdotes about what individual companies have done, and say they plan to do, in response to the minimum wage hike overshadows more meaningful information about the net effect across all companies in the industry.

The Wall Street Journal (12/28/23) said last year that "it defies economics and common sense to think that businesses won’t adapt by laying off workers." Since that hasn't happened, does the Journal need better economists—or more sense?

And what about agency? The Wall Street Journal (12/28/23) contented that “it defies economics and common sense to think that businesses won’t adapt by laying off workers” in response to the new law. But why? Is there no question lurking in there about corporate priorities? About executive pay? About the fact that consumers and workers are the same people?

The question calls for thoughtfulness—will, for example, fast food companies cut corners by dumping formerly in-house delivery workers off on companies like DoorDash and Uber Eats, which are not subject to the same labor regulations? How will economic data measure that?

That would be a story for news media to engage, if they were interested in improving the lives of struggling workers. They could also broaden the minimum wage discussion to complementary policy changes—as Smyth suggested, "expanded unemployment insurance, the Earned Income Tax Credit, a job guarantee, and universal basic income."

The narrow focus on whether a Big Mac costs 15 cents more, and if it does, shouldn’t you yell at the people behind the counter, is a distortion, and a tired one, that should have been retired long ago.