Controversy continues to swirl around California’s minimum wage requirements with a recent study prompting a counter study from academic circles and business owners doubling down on criticism of the rules as destructive to their industry.
While economist Christopher Thornberg's March 2025 analysis claimed the Fast Act resulted in over 23,100 lost jobs across the industry, a new academic study is challenging those findings and suggesting the law's impact has been minimal. Meanwhile, franchise owners report significant financial strain since the wage increase took effect.
The debate centers on California's AB 1228, which raised the minimum wage for workers at chain restaurants with 60 or more locations nationwide to $20 per hour - $4 higher than the state's standard minimum wage.
Daniel MacDonald, an economics professor at California State University San Bernardino, released a report this month arguing that Thornberg's methodology was fundamentally flawed.
"The major problem with the method is that a balance of U.S. states is not a proper policy counterfactual for Fast Act analysis," MacDonald wrote. "California's fast food labor market is not like the rest of the U.S."
MacDonald's study suggests comparing California instead with neighboring high-wage states such as Oregon, Washington, and Colorado provides a more accurate picture. Using this approach, he found that while California has experienced declines in fast-food employment, those declines began more than six months before the Fast Act took effect.
The study also examined full-service restaurants in California as an alternative control group, noting that these establishments also pay minimum wage but weren't subject to the Fast Act increase.
"The Fast Act should have caused a divergence between employment in limited- and full-service restaurants, but this has not happened," MacDonald wrote, suggesting the law's direct employment impact was "much smaller" than claimed.
McDonald's franchise owner Kerri Harper-Howie, who operates multiple locations across Los Angeles County, tells a different story about the law's impact on her family-owned business.
"The reality is that our industry alone in the state of California was targeted with an overnight 25% increase in the minimum wage," Harper-Howie said. "It is so unheard of, unprecedented for one single industry to be targeted with an overnight wage increase."
Harper-Howie described a dramatic shift in her restaurants' profitability that coincided precisely with the wage increase.
"The vast majority, more than 75% of our restaurants were positive sales in March of 2024," she said. "April of 2024, every single one of my restaurants was at negative sales."
That negative trend continued for 12 consecutive months, only briefly interrupted by a recent Minecraft promotional campaign. Harper-Howie said the timing made it difficult to attribute the downturn to any factor other than the minimum wage increase.
While Harper-Howie avoided layoffs, she had to significantly reduce employee hours as sales declined. She also raised prices, which she believes made McDonald's less accessible to customers in her communities who were still making the standard minimum wage.
"The people who were around us working at CVS and Macy's and Dollar Tree – wherever else – they are not making a wage that was allowing them to afford to enjoy McDonald's in the frequency and the quantity that they were previously able to," she said.
With labor costs representing approximately 30-32% of her business expenses, the 25% wage increase created what Harper-Howie called "massive" financial pressure. Her organization's capital reserves, built over 40 years of family ownership, have declined by 30% in just nine months as they've struggled to cover costs.
"We have been consistently having to shuffle money between accounts," she said. "We're shuffling that just trying to pay our bills."
The conflicting narratives reflect the challenge in evaluating the law's true impact. MacDonald's study notes that even if job losses occurred, other factors might explain why they weren't more significant, including reduced employee turnover, selective layoffs of lower-productivity workers, and modest price increases passed on to consumers.
"It is important to note however that the price increases have been minor and that the gain for workers is much more significant," MacDonald wrote.
Earlier studies from Harvard's Kennedy School and UC Berkeley's Institute for Research and Labor Employment had also concluded the wage increase produced substantial benefits for workers without significant negative employment effects.
But Thornberg argued those analyses were premature and failed to account for the time needed for industries to adapt to such sharp labor cost increases. His study, based on revised employment data from California's Employment Development Department, showed fast-food employment fell 3.2% in the state while growing 0.8% nationally.
Harper-Howie emphasized that many people don't understand the franchised nature of the fast-food industry, with 95% of McDonald's restaurants being family-owned businesses rather than corporate-owned locations.
"People drive down the street and they see those arches, and they think corporate McDonald's, and they think, 'Oh, 25% increase. McDonald's corporate making billions and billions of dollars. They can afford it,'" she said. "And that's not at all the reality."
She noted that most franchise restaurants in California are owned by women and people of color, and these businesses receive no financial assistance from their corporate parents during economic downturns.
"What's happening is that generations of people, women-owned businesses, family-owned, people of color-owned businesses are being targeted for economic hardship," Harper-Howie said.
The uncertainty leaves business owners like Harper-Howie concerned about the future.
"How long we're going to be in this particular financial predicament? I don't know. It's concerning," she said, adding that California voters rejected a ballot measure last November that would have raised the minimum wage for other industries to $18 per hour.
"I would love for the playing field to be leveled," Harper-Howie said, "but if California voters have already said no, I don't know how legislators are now going to come back and mandate increase in the minimum wage."
