The thesis seems to be that businesses would pay more if they were smart enough to realize it was in their interests. Since they aren't, raising minimum wage seems to force them to pay more, which actually lowers labor costs because they have less turnover and fewer mistakes by new employees. Maybe. I've always been surprised that more businesses didn't pay more, since a few dollars an hour more would often bring in a much superior employee.
I wouldn't have bought this take in the past. However, currently, right now, I am fighting an uphill battle trying to get a raise for an incredibly bright, thoughtful, attentive employee who directly contributes to the bottom line. One who is embarrassingly underpaid. And one I will probably lose because of this situation, which will ultimately be a costly waste of time and effort to rehire and retrain.
> No, the evidence cited is that a significant portion is also absorbed by companies making lower profits (and a small amount by higher prices).
From the article:
The authors calculated that about 62 percent of the wage increase was absorbed through higher prices, while the rest was likely absorbed by a mix of reduced turnover and, crucially, lower profits for franchisees—hence the massive industry resistance.
Bargaining power is undoubtedly an issue here, but the success of the increase in minimum wage can probably be attributed to it being uniform across similar businesses and in an industry that can't exactly move to the next state over (without loosing business).
That article leaves out a lot of result that should have been cited, but they run counter to his narrative and would make the story sell less.
The last big CBO analysis on results of min wage does a better job summarizing all the literature. They also made a nice tool to visualize results https://www.cbo.gov/publication/55681
The results are pretty much what one should expect.
So you are saying that the pie is not grown by paying more, it's just that the workers are getting a bigger slice. Could be. That didn't seem to be the main point of the article, but that could also be true. I haven't looked at the data carefully.
The pie did grow, so it’s a benefit to society. It just didn’t grow enough that giving the employees a larger slice didn’t slightly shrink the owner’s pie. However, The owners pie shrunk less than it would have had the pie not grown due to increased efficiency.
I wonder how these studies captures the way the workers have more money that immediately flows back into the economy, benefiting everyone.
Higher wages should create more demand, and that should create pressure to raise prices.
On the other hand, if people were going into debt with high interest credit cards, then it's very possible that demand doesn't actually change. Instead credit card debt gets paid off, or surplus income is banked as savings.
Minimum wage increases raised prices by only tens of cents per unit. The rest is corporate profits. McDonald’s and Starbucks quarterly and annual profit figures are readily available with a quick search. They can afford to pay labor more.
Indeed! Which is why minimum wage laws and unions are so important. The evidence shows they can afford it and they wouldn’t pay it voluntarily, so keep pushing the minimum wage up.
Yeah. The idea that corporations are going to raise wages on their own even for the general well being of society has been debunked many times over. These things work according to power and leverage, and nothing less.
Do you have any evidence of CEOs being fired by shareholders because workers got a payrise? Starbucks has been handing out payrises of a couple of percent this year but I don't see shareholders firing the CEO. Likewise many other public companies.
McDonalds doesn't publish prices online, but for me in downtown Seattle - with a famously high minimum wage ($20) everyone said was going to destroy the economy - a smallest-size Starbucks Americano at my local one is $3.85 according to their website.
I think what you're experiencing might be "business owners charge what the market will bear" and you, as part of the market, are bearing price increases.
California has a lot of structural problems that other states don't, and, a few big industries that pay a lot of taxes that allow them to paper over issues.
As an indicator for what other states should or shouldn't do, California's unique situation simply doesn't matter .
Is this an opinion piece or news? It's categorized as "ideas" at the top of the page. I do not know what that means. But the advocacy at the end makes it seem not like straight news.
It's remarkable we even need to say it out loud: increasing the price of labor reduces the quantity demanded of labor. Believing otherwise requires magical thinking.
Your source agrees with me. I made no claim as to the significance, only the direction of the effect.
Additionally, this research has historically yielded mixed results (likely due to the difficulty of isolating the effect of minimum wage in a highly dynamic marketplace for labor). Here's a good article on the topic from the SF Federal Reserve: https://www.frbsf.org/research-and-insights/publications/eco...
All that to say, I prefer the simple intuition that people want less of a thing when it costs more. This is a basic fact of life that most everyone seems to accept until policy gets mentioned.
Huh, perhaps Samsung should double Apple's prices. By your logic, that should make them wildly successful, no?
A better example of quantity demanded paradoxically increasing with price is in the designer hand bag market. The value of luxury goods is in part due to the signal they send that the owner can afford such an expensive item.
However, that is just an exception proving the rule. Your point about Apple makes no sense because they've also increased the quality of the goods they ship in conjunction with their price. Unless you're suggesting that minimum wage laws somehow enhance the laborers' productive capacities.
This won’t apply when quantity demanded is fixed. Fast food restaurants need a certain quantity of labor hours to function, and they probably already push right down to the limit to save money.
This would be true in a perfect market, but in real life things aren’t priced perfectly and people don’t make 100% economically rational decisions. These imperfections means there’s sometimes lots of room to change the price of things before affecting demand in a meaningful way.
Correct. Generally in economics we discuss individual effects while holding other effects equal (ceteris paribus).
To illustrate, if a McDonald's location can sell 1000 big macs a day at $2 per burger, do you expect they'll sell more (or even as many) if they raise the price to $3?
Of course not. This intuition is obvious to everyone until policy gets involved. It would not make sense for employers to want just as much labor when the price goes up. This would imply a perfectly inelastic demand for labor.
> Generally in economics we discuss individual effects while holding other effects equal (ceteris paribus).
Ceteris paribus is Latin for "holding a cat by its paws to look under its tail", named so because it tells you how long you can "hold other effects equal" before you'll be made to regret the attempt.
This is to say, the economy is a system of tight feedback loops, not independently random effects. This is the part I rarely see emphasized wrt. "ceteris paribus". You're trying to hold constant the very effects that will react to change under discussion, which both severely limits the range of a single forecasting step, and should invite conversation about those other effects.
I don't disagree. I brought it up specifically as a constructive criticism of the original McDonald's argument of choosing other restaurants. It's easier to illustrate economic concepts when only one parameter is changing (e.g. price of big mac) vs multiple (e.g. inexpensive McD's vs more expensive alternatives).
As you've pointed out, any economic policy proposal should consider 2nd/3rd/ith order effects.
> if a McDonald's location can sell 1000 big macs a day at $2 per burger, do you expect they'll sell more (or even as many) if they raise the price to $3?
I mean, there are other factors in employment decisions. Raising the price to $3 may reduce volume but increase revenue.
Or math. Or reality. Magical thinking is just making claims like you did with no evidence. Simple models made by the servants of the rich don’t predict real world outcomes.
It’s no different than when politicians pass a law that the police union doesn’t like, and crime goes up. Look! Proof that the law was bad. It’s remarkable that anyone would say otherwise. Of course it has nothing to do with the fact that the police just stop doing their job until they get the law changed.
California and in particular SF, there’s been substantial reporting on police inaction. It’s been improving but for a while there were regular stories or police watching people do felonies and not bothering to do a single thing.
I can't speak for every situation but it's worth keeping in mind that police inaction can be a result of specific policies placed on police departments by the city or state. For example, up until recently, San Francisco only allowed officers to engage in vehicle pursuits in the case of violent felonies and Governor Newsom is still asking Oakland to amend their own No Chase restrictions. If elected officials tell cops not to engage in certain policing actions, I would hope that law enforcement officers would hew to those rules pretty closely
Thanks for posting this. I was also trying to find some more recent articles that also contrasted the Atlantic author’s cherry-picked points, and who also appears to lean a bit to the left.
I’ll admit to not reading the entire article, but anecdotally fast food prices are within 10% of some table service restaurants here in Southern California. I don’t know if that’s really for or against the law, but calling the bill a huge success or failure depends on cherry picking stats.
In fairness, a number of places I occasionally get take-out from are the same price whether take-out or eat-in. I may prefer to take-out--and any alcohol is probably cheaper--but I don't really view take-out as categorically cheaper. But then I rarely eat at McDonalds.
The problem is the definition of success. Yes, the sector grew and employees made more; but franchisees felt some pain. In fact, I'm sure someone will argue that they had to expand precisely to try and recoup the profit lost to lower margins.
For capital owners, no redistributive policy can ever be a success, by definition.
Their own choice of a time interval to look at (Apr - Oct) looks cherry picked. If you include the next month, it goes from a +1000 job gain to -1200 loss. Overall it looks like the effect on employment at least in the short term is about zero. But it definitely increased cost. So the only winners here are I guess the people whose wages were pushed up by this law, and everyone else is a loser. I wouldn't call this a success, I'd call it a classic california left wing economic shell game.
You claim to refer to choices in the article, yet the content of the article actually bears no resemblance to your post.
> Simply comparing each month’s job growth with the same month the previous year, which avoids the problem of picking a start date, reveals that California’s fast-food sector gained jobs in all but one month since September 2023.
As for who the losers are, the data is quite clear: Mostly corporate profits. The rational response of a corporation when faced with a law that reduces its profits is to lobby against the law and invest in propaganda that disparages the law.
> That doesn’t mean raising the minimum wage had no negative consequences. Reich and his co-author, Denis Sosinsky, found that the higher minimum wage caused menu prices in California fast-food chains to rise by about 3.7 percent. That number is far lower than the “$20 Big Macs” that critics of the law warned of, but it’s still significant at a time when many consumers are deeply upset over the post-pandemic spike in food prices. Even so, Reich points out that this number pales in comparison with the 18 percent raise that the average fast-food worker received because of the new law. (The authors calculated that about 62 percent of the wage increase was absorbed through higher prices, while the rest was likely absorbed by a mix of reduced turnover and, crucially, lower profits for franchisees—hence the massive industry resistance.)
Finally, why a shell game? There is nothing hidden here, there is no con. No money is secretly moved around. Workers have more money. Owners and consumers less (the latter very slightly so).
> As for who the losers are, the data is quite clear: Mostly corporate profits.
Amongst the problems I have with the policy are around reducing profits being presented as something purely beneficial or at no cost, and claiming that we have seen enough to "call it good" within 6 months of implementation. Corporate profits drive investment and investment grows the pie. You won't see these impacts over 6 months but you will see them over 1-5 years. Restaurant closures in response to these policies can take 6 months to few years because the medium/large size franchisees will run a franchise operating at 0 profit for a year or two until the franchise requires capital investment (replace the parking lot, buy a new grill etc) or their financing situation changes against them such that they can't maintain working capital. "20 dollar big mac" is and was unrealistic fanfare, the most likely scenario is languishing for a while.
From the article: "choosing a start date of either September 2023 (when the law was signed) or April 2024 (when it took effect) would have shown that the number of jobs had risen."
This statement is literally false if you include november.
The whole bit about comparing employment numbers to the corresponding month a year prior doesn't make any sense. One reason is that the law has only been in effect since April and another is that the employment trends in 2023 in fast food restaurants match trends in overall employment which you can look at here:
https://data.bls.gov/timeseries/SMS06000000000000001?amp%253...
I suppose arguing over whether this redistributive scheme constitutes a shell game or simply wise governance isn't very interesting.
> This statement is literally false if you include november.
look at other states, they also had a decline in fast food employment from October 2024 to November 2024. E.G. Nebraska had a 0.62% decline and California had a 0.29% decline.
They offered several other forms of analysis besides just looking at April - October (for instance comparing each month to the previous year’s month and comparing other states that didn’t change their minimum wage laws.)
As for if it was effective: if the point of the law was to increase the money flowing to fast food workers it managed to increase their wages without decreasing employment, so I think it was pretty clearly a success. Now if that is a worthwhile thing to try to accomplish is completely a matter opinion.
> Their own choice of a time interval to look at (Apr - Oct) looks cherry picked. If you include the next month, it goes from a +1000 job gain to -1200 loss.
I didn't check all states, but most show a decline in fast food employment from Oct to Nov 2024, based on "All Employees: Leisure and Hospitality: Limited-Service Restaurants and Other Eating Places in X" data from St Louis Fed.
Nevada Oct 2024: 65.424 Nov: 65.192 0.35% decline
California Oct 2024: 740.069 Nov: 737.886 0.29% decline
Utah Oct 2024: 69.571 Nov: 69.406 0.23% decline
Nebraska Oct 2024: 37.732 Nov: 37.4999 0.61% decline
The title is a bit more conclusive than the article content. The author does a reasonable job covering the many indicators and trends surrounding fast food employment (seasonality, for example), and the short term results.
It's too early and too narrow an observation to draw conclusions. The article is better summarized as "minimum wage doesn't lead to the short term drop in employment and exploding inflation as expected".
Companies can shift around inventory, hiring, funds and more to address labor inflation in the short term. we won't see the real consequences of this policy for a year or two until the industry runs out of other tools.
Comparing In n Out (high wages, low marketing costs) to McDonalds/Carls/Burger King etc (low wages, high marketing & product development costs) -- companies can deliver a better service at a low price point if they are managed well.
I don't expect minimum wage to turn McDonalds into In n Out though.
Their own link to the seasonally adjusted california low-service restaurant workers employment numbers shows it dropping from April 2024 to Nov 2024, albeit by a fairly small amount (~1200 people) though using the articles preferred time interval (April to October) shows a gain of about 1000 people. This is out of a total number of people of about 750,000. So this all looks like noise to me. Clearly there's demand for fast food, still, and restaurants adapted by raising prices. The article claims the law caused only a 3.7% price increase but that is on top of all the other inflation that has happened.
California real estate rises without bound, making other attempts to shore up wages moot. It all goes to property owners. The state is one giant property owners cartel.
Cartel is explicit— Cali homeowners do a lot to try to limit production to keep prices high.
It’s one reason I no longer live there. The only rational move is to leave.
It doesn't seem like you can make a claim one way or the other.
Other restaurants may absorb lost labor, and the negative impact may not be immediately visible. If you are not cooking at home, and McDonald's is the same price as table service, then table service is the better value. It has been for me, anecdotally. We'd not see those choices reflected in overall employment stats, because another restaurant will need to hire, a seemingly net zero change in employment rates.
But, it's very likely that fast food chains, including privately owned fast food franchisees like many McDonald's locations will have lost market share. Those locations may reduce their workforce, forcing people to change jobs. In the interim while the workforce is shuffled about, the losses would be invisible except in unemployment claims. And without being able to tie those claims to any profession, since those claimants aren't skilled in one, we can't make any conclusion about whether or not those claimants are the result of a higher wage requirement.
The eventuality I might expect would be a loss of competition in the fast food sector, if the above is true.
The thesis seems to be that businesses would pay more if they were smart enough to realize it was in their interests. Since they aren't, raising minimum wage seems to force them to pay more, which actually lowers labor costs because they have less turnover and fewer mistakes by new employees. Maybe. I've always been surprised that more businesses didn't pay more, since a few dollars an hour more would often bring in a much superior employee.
I wouldn't have bought this take in the past. However, currently, right now, I am fighting an uphill battle trying to get a raise for an incredibly bright, thoughtful, attentive employee who directly contributes to the bottom line. One who is embarrassingly underpaid. And one I will probably lose because of this situation, which will ultimately be a costly waste of time and effort to rehire and retrain.
No, the evidence cited is that a significant portion is also absorbed by companies making lower profits (and a small amount by higher prices).
So this is simply also a case of lack of bargaining power of workers.
> No, the evidence cited is that a significant portion is also absorbed by companies making lower profits (and a small amount by higher prices).
From the article:
The authors calculated that about 62 percent of the wage increase was absorbed through higher prices, while the rest was likely absorbed by a mix of reduced turnover and, crucially, lower profits for franchisees—hence the massive industry resistance.
Bargaining power is undoubtedly an issue here, but the success of the increase in minimum wage can probably be attributed to it being uniform across similar businesses and in an industry that can't exactly move to the next state over (without loosing business).
That article leaves out a lot of result that should have been cited, but they run counter to his narrative and would make the story sell less.
The last big CBO analysis on results of min wage does a better job summarizing all the literature. They also made a nice tool to visualize results https://www.cbo.gov/publication/55681
The results are pretty much what one should expect.
So you are saying that the pie is not grown by paying more, it's just that the workers are getting a bigger slice. Could be. That didn't seem to be the main point of the article, but that could also be true. I haven't looked at the data carefully.
Not true about the pie not growing.
The pie did grow, so it’s a benefit to society. It just didn’t grow enough that giving the employees a larger slice didn’t slightly shrink the owner’s pie. However, The owners pie shrunk less than it would have had the pie not grown due to increased efficiency.
I wonder how these studies captures the way the workers have more money that immediately flows back into the economy, benefiting everyone.
> I wonder how these studies captures the way the workers have more money that immediately flows back into the economy, benefiting everyone.
I think you left out the part about, "and at what point that creates inflationary pressure."
Higher wages should create more demand, and that should create pressure to raise prices.
On the other hand, if people were going into debt with high interest credit cards, then it's very possible that demand doesn't actually change. Instead credit card debt gets paid off, or surplus income is banked as savings.
Minimum wage does not increase inflation in any measurable amount. Has been demonstrated over and over in praxis.
deflation is good?
Is wage the only cause of inflation we care about? Guess so.
This was why Henry Ford paid a decent wage. It turns out to reduce labor costs due to turnover dropping and less time spent training workers.
Increasing the minimum wage is cool and all but I really don’t appreciate my Big Mac costing $7 and the smallest sized Starbucks Americano $4.
I guess the silver lining is that this law made me go grocery shopping more often and as a result I eat healthier.
Minimum wage increases raised prices by only tens of cents per unit. The rest is corporate profits. McDonald’s and Starbucks quarterly and annual profit figures are readily available with a quick search. They can afford to pay labor more.
https://investor.starbucks.com/news/financial-releases/defau...
https://www.mcdonalds.com/corpmcd/investors/financial-inform...
> They can afford to pay labor more.
Only if they decide to pay shareholders less.
And shareholders are not going to accept getting paid less in order to pay labor more. That's a quick way for CEOs get fired.
Indeed! Which is why minimum wage laws and unions are so important. The evidence shows they can afford it and they wouldn’t pay it voluntarily, so keep pushing the minimum wage up.
Yeah. The idea that corporations are going to raise wages on their own even for the general well being of society has been debunked many times over. These things work according to power and leverage, and nothing less.
That's a quick way for CEOs get fired.
Do you have any evidence of CEOs being fired by shareholders because workers got a payrise? Starbucks has been handing out payrises of a couple of percent this year but I don't see shareholders firing the CEO. Likewise many other public companies.
Neither do I, but that has nothing to do with the minimum wage increase.
McDonalds doesn't publish prices online, but for me in downtown Seattle - with a famously high minimum wage ($20) everyone said was going to destroy the economy - a smallest-size Starbucks Americano at my local one is $3.85 according to their website.
I think what you're experiencing might be "business owners charge what the market will bear" and you, as part of the market, are bearing price increases.
Publish a letter to McDonald’s shareholders to reduce franchising costs and hence reduce their 30%+ profit margins.
https://www.macrotrends.net/stocks/charts/MCD/mcdonalds/prof...
Also fix their broken ice cream machines. That is maybe 2% unto itself.
https://mcbroken.com/
I doubt those prices are unique to California.
Those prices are pretty famously lower in European nations with higher minimum wages.
California has a lot of structural problems that other states don't, and, a few big industries that pay a lot of taxes that allow them to paper over issues.
As an indicator for what other states should or shouldn't do, California's unique situation simply doesn't matter .
Alternate perspective:
https://reason.com/video/2024/12/19/no-californias-20-minimu...
Is this an opinion piece or news? It's categorized as "ideas" at the top of the page. I do not know what that means. But the advocacy at the end makes it seem not like straight news.
It's remarkable we even need to say it out loud: increasing the price of labor reduces the quantity demanded of labor. Believing otherwise requires magical thinking.
Yet empirical results don’t find significant impact to employment rates: https://www.nber.org/papers/w32925
It’s almost magical that simplified, reductionist economic models don’t always play out in the real world.
Your source agrees with me. I made no claim as to the significance, only the direction of the effect.
Additionally, this research has historically yielded mixed results (likely due to the difficulty of isolating the effect of minimum wage in a highly dynamic marketplace for labor). Here's a good article on the topic from the SF Federal Reserve: https://www.frbsf.org/research-and-insights/publications/eco...
All that to say, I prefer the simple intuition that people want less of a thing when it costs more. This is a basic fact of life that most everyone seems to accept until policy gets mentioned.
> people want less of a thing when it costs more. This is a basic fact of life
And still, Apple got to be the biggest company in the world by charging more, constantly and systematically.
Maybe there are more things in heaven and earth than are dreamt in your philosophy.
Maybe Apple charged more, but for a different item? “Maybe there are more things…” indeed.
Huh, perhaps Samsung should double Apple's prices. By your logic, that should make them wildly successful, no?
A better example of quantity demanded paradoxically increasing with price is in the designer hand bag market. The value of luxury goods is in part due to the signal they send that the owner can afford such an expensive item.
However, that is just an exception proving the rule. Your point about Apple makes no sense because they've also increased the quality of the goods they ship in conjunction with their price. Unless you're suggesting that minimum wage laws somehow enhance the laborers' productive capacities.
This won’t apply when quantity demanded is fixed. Fast food restaurants need a certain quantity of labor hours to function, and they probably already push right down to the limit to save money.
This would be true in a perfect market, but in real life things aren’t priced perfectly and people don’t make 100% economically rational decisions. These imperfections means there’s sometimes lots of room to change the price of things before affecting demand in a meaningful way.
If your claim disagrees with reality, should I believe reality or you?
The price is only one factor among many. People eat at restaurants other than McDonalds, even though McDonalds has a lower price.
Correct. Generally in economics we discuss individual effects while holding other effects equal (ceteris paribus).
To illustrate, if a McDonald's location can sell 1000 big macs a day at $2 per burger, do you expect they'll sell more (or even as many) if they raise the price to $3?
Of course not. This intuition is obvious to everyone until policy gets involved. It would not make sense for employers to want just as much labor when the price goes up. This would imply a perfectly inelastic demand for labor.
> Generally in economics we discuss individual effects while holding other effects equal (ceteris paribus).
Ceteris paribus is Latin for "holding a cat by its paws to look under its tail", named so because it tells you how long you can "hold other effects equal" before you'll be made to regret the attempt.
This is to say, the economy is a system of tight feedback loops, not independently random effects. This is the part I rarely see emphasized wrt. "ceteris paribus". You're trying to hold constant the very effects that will react to change under discussion, which both severely limits the range of a single forecasting step, and should invite conversation about those other effects.
I don't disagree. I brought it up specifically as a constructive criticism of the original McDonald's argument of choosing other restaurants. It's easier to illustrate economic concepts when only one parameter is changing (e.g. price of big mac) vs multiple (e.g. inexpensive McD's vs more expensive alternatives).
As you've pointed out, any economic policy proposal should consider 2nd/3rd/ith order effects.
Most of the question in any kind of research is “what else didn't stay equal that we didn’t pay attention to”
> if a McDonald's location can sell 1000 big macs a day at $2 per burger, do you expect they'll sell more (or even as many) if they raise the price to $3?
I mean, there are other factors in employment decisions. Raising the price to $3 may reduce volume but increase revenue.
Or math. Or reality. Magical thinking is just making claims like you did with no evidence. Simple models made by the servants of the rich don’t predict real world outcomes.
It’s no different than when politicians pass a law that the police union doesn’t like, and crime goes up. Look! Proof that the law was bad. It’s remarkable that anyone would say otherwise. Of course it has nothing to do with the fact that the police just stop doing their job until they get the law changed.
> the police just stop doing their job
Is there evidence of that, that you know of?
California and in particular SF, there’s been substantial reporting on police inaction. It’s been improving but for a while there were regular stories or police watching people do felonies and not bothering to do a single thing.
I can't speak for every situation but it's worth keeping in mind that police inaction can be a result of specific policies placed on police departments by the city or state. For example, up until recently, San Francisco only allowed officers to engage in vehicle pursuits in the case of violent felonies and Governor Newsom is still asking Oakland to amend their own No Chase restrictions. If elected officials tell cops not to engage in certain policing actions, I would hope that law enforcement officers would hew to those rules pretty closely
Yes, lots
https://www.themarshallproject.org/records/1571-police-slowd...
Reason is a straight advocacy publication for (libertarianism?), and I think they would be proud to tell you that.
I think that makes them a fairly decent source if your goal is a counter point to whatever the Atlantic's take on the issue is.
I don't understand. If you are trying to express something about the Atlantic, then just say it.
Thanks for posting this. I was also trying to find some more recent articles that also contrasted the Atlantic author’s cherry-picked points, and who also appears to lean a bit to the left.
The source that lead the original claim:
https://irle.berkeley.edu/wp-content/uploads/2024/09/Sectora...
Nowhere does it say minimum wage jobs increased or that minimum wage workers earned more per year
I’ll admit to not reading the entire article, but anecdotally fast food prices are within 10% of some table service restaurants here in Southern California. I don’t know if that’s really for or against the law, but calling the bill a huge success or failure depends on cherry picking stats.
Also true in central Wisconsin where there isn't a law such as this, for what it is worth.
Rent seeking everywhere is strangling the entire US economy.
In fairness, a number of places I occasionally get take-out from are the same price whether take-out or eat-in. I may prefer to take-out--and any alcohol is probably cheaper--but I don't really view take-out as categorically cheaper. But then I rarely eat at McDonalds.
The whole point of the article is that you have to cherry pick stats to show it was a failure, but every sound analysis shows that it was a success.
The problem is the definition of success. Yes, the sector grew and employees made more; but franchisees felt some pain. In fact, I'm sure someone will argue that they had to expand precisely to try and recoup the profit lost to lower margins.
For capital owners, no redistributive policy can ever be a success, by definition.
Their own choice of a time interval to look at (Apr - Oct) looks cherry picked. If you include the next month, it goes from a +1000 job gain to -1200 loss. Overall it looks like the effect on employment at least in the short term is about zero. But it definitely increased cost. So the only winners here are I guess the people whose wages were pushed up by this law, and everyone else is a loser. I wouldn't call this a success, I'd call it a classic california left wing economic shell game.
You claim to refer to choices in the article, yet the content of the article actually bears no resemblance to your post.
> Simply comparing each month’s job growth with the same month the previous year, which avoids the problem of picking a start date, reveals that California’s fast-food sector gained jobs in all but one month since September 2023.
As for who the losers are, the data is quite clear: Mostly corporate profits. The rational response of a corporation when faced with a law that reduces its profits is to lobby against the law and invest in propaganda that disparages the law.
> That doesn’t mean raising the minimum wage had no negative consequences. Reich and his co-author, Denis Sosinsky, found that the higher minimum wage caused menu prices in California fast-food chains to rise by about 3.7 percent. That number is far lower than the “$20 Big Macs” that critics of the law warned of, but it’s still significant at a time when many consumers are deeply upset over the post-pandemic spike in food prices. Even so, Reich points out that this number pales in comparison with the 18 percent raise that the average fast-food worker received because of the new law. (The authors calculated that about 62 percent of the wage increase was absorbed through higher prices, while the rest was likely absorbed by a mix of reduced turnover and, crucially, lower profits for franchisees—hence the massive industry resistance.)
Finally, why a shell game? There is nothing hidden here, there is no con. No money is secretly moved around. Workers have more money. Owners and consumers less (the latter very slightly so).
> As for who the losers are, the data is quite clear: Mostly corporate profits.
Amongst the problems I have with the policy are around reducing profits being presented as something purely beneficial or at no cost, and claiming that we have seen enough to "call it good" within 6 months of implementation. Corporate profits drive investment and investment grows the pie. You won't see these impacts over 6 months but you will see them over 1-5 years. Restaurant closures in response to these policies can take 6 months to few years because the medium/large size franchisees will run a franchise operating at 0 profit for a year or two until the franchise requires capital investment (replace the parking lot, buy a new grill etc) or their financing situation changes against them such that they can't maintain working capital. "20 dollar big mac" is and was unrealistic fanfare, the most likely scenario is languishing for a while.
From the article: "choosing a start date of either September 2023 (when the law was signed) or April 2024 (when it took effect) would have shown that the number of jobs had risen."
This statement is literally false if you include november.
The whole bit about comparing employment numbers to the corresponding month a year prior doesn't make any sense. One reason is that the law has only been in effect since April and another is that the employment trends in 2023 in fast food restaurants match trends in overall employment which you can look at here: https://data.bls.gov/timeseries/SMS06000000000000001?amp%253...
I suppose arguing over whether this redistributive scheme constitutes a shell game or simply wise governance isn't very interesting.
> This statement is literally false if you include november.
look at other states, they also had a decline in fast food employment from October 2024 to November 2024. E.G. Nebraska had a 0.62% decline and California had a 0.29% decline.
https://fred.stlouisfed.org/seriesBeta/SMU31000007072259001S...
They offered several other forms of analysis besides just looking at April - October (for instance comparing each month to the previous year’s month and comparing other states that didn’t change their minimum wage laws.)
As for if it was effective: if the point of the law was to increase the money flowing to fast food workers it managed to increase their wages without decreasing employment, so I think it was pretty clearly a success. Now if that is a worthwhile thing to try to accomplish is completely a matter opinion.
> Their own choice of a time interval to look at (Apr - Oct) looks cherry picked. If you include the next month, it goes from a +1000 job gain to -1200 loss.
I didn't check all states, but most show a decline in fast food employment from Oct to Nov 2024, based on "All Employees: Leisure and Hospitality: Limited-Service Restaurants and Other Eating Places in X" data from St Louis Fed.
Nevada Oct 2024: 65.424 Nov: 65.192 0.35% decline
California Oct 2024: 740.069 Nov: 737.886 0.29% decline
Utah Oct 2024: 69.571 Nov: 69.406 0.23% decline
Nebraska Oct 2024: 37.732 Nov: 37.4999 0.61% decline
https://archive.ph/8zN87
The title is a bit more conclusive than the article content. The author does a reasonable job covering the many indicators and trends surrounding fast food employment (seasonality, for example), and the short term results.
It's too early and too narrow an observation to draw conclusions. The article is better summarized as "minimum wage doesn't lead to the short term drop in employment and exploding inflation as expected".
Companies can shift around inventory, hiring, funds and more to address labor inflation in the short term. we won't see the real consequences of this policy for a year or two until the industry runs out of other tools.
Comparing In n Out (high wages, low marketing costs) to McDonalds/Carls/Burger King etc (low wages, high marketing & product development costs) -- companies can deliver a better service at a low price point if they are managed well.
I don't expect minimum wage to turn McDonalds into In n Out though.
Their own link to the seasonally adjusted california low-service restaurant workers employment numbers shows it dropping from April 2024 to Nov 2024, albeit by a fairly small amount (~1200 people) though using the articles preferred time interval (April to October) shows a gain of about 1000 people. This is out of a total number of people of about 750,000. So this all looks like noise to me. Clearly there's demand for fast food, still, and restaurants adapted by raising prices. The article claims the law caused only a 3.7% price increase but that is on top of all the other inflation that has happened.
California real estate rises without bound, making other attempts to shore up wages moot. It all goes to property owners. The state is one giant property owners cartel.
Cartel is explicit— Cali homeowners do a lot to try to limit production to keep prices high.
It’s one reason I no longer live there. The only rational move is to leave.
It doesn't seem like you can make a claim one way or the other.
Other restaurants may absorb lost labor, and the negative impact may not be immediately visible. If you are not cooking at home, and McDonald's is the same price as table service, then table service is the better value. It has been for me, anecdotally. We'd not see those choices reflected in overall employment stats, because another restaurant will need to hire, a seemingly net zero change in employment rates.
But, it's very likely that fast food chains, including privately owned fast food franchisees like many McDonald's locations will have lost market share. Those locations may reduce their workforce, forcing people to change jobs. In the interim while the workforce is shuffled about, the losses would be invisible except in unemployment claims. And without being able to tie those claims to any profession, since those claimants aren't skilled in one, we can't make any conclusion about whether or not those claimants are the result of a higher wage requirement.
The eventuality I might expect would be a loss of competition in the fast food sector, if the above is true.
Of course, that's all hypothetical.
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