In April, more than 550,000 California fast-food workers received a raise to $20 an hour as mandated by a state law passed last year. According to a study by the UC Berkeley Institute on Labor and Employment, predictions that the law would lead to massive layoffs and dramatic price increases have not been substantiated.

The study, coauthored by economists Michael Reich and Daniel Sosinskiy, found that the pay raises increased average hourly wages by 18%. Prices for the most popular menu items rose by 3.7% or about 15 cents for a $4 hamburger. At the same time, employment levels in the fast-food industry remained stable.

The study draws on two decades of empirical research about the effects of minimum wage and living wage increases. It demonstrates that all of the higher wage costs aren’t passed on to consumers. Employers find other ways to adjust, including reduced hiring and training costs due to higher worker retention rates and a slight reduction in profits.

The pay hike directly addresses economic insecurity of fast-food workers at the bottom of the labor market.

The California Budget and Policy Project reports that California has experienced a generation of rising inequality. Income distribution is more unequal than at any time since the Great Depression. Average adjusted gross incomes between 1987 and 2021 dropped by 20% for the bottom two-fifths, while incomes for the top 1% skyrocketed by 252%.

According to the United Ways of California, one-third of California households are working poor, with at least one member reporting income from work but unable to pay for necessities such as housing, food, medical care, transportation, child care and taxes.

Most fast-food workers are members of these households; two-thirds are adults over the age of 20 whose earnings constitute 40% of their family’s total income. To make ends meet, many hold multiple jobs, and two-thirds rely on public assistance.

The industry is dominated by 20 giant chains such as McDonald’s, Starbucks, Wendy’s, Taco Bell, and Burger King that have enjoyed robust profits and rising markups. The $20 fast-food minimum wage only applies to companies with 60 or more locations nationwide. There is no doubt that the fast-food giants can absorb the costs of paying higher wages.

Moreover, the Federal Reserve Bank of Chicago finds that raising the minimum wage stimulates the local economy. Fast-food workers spend their increased earnings on necessities benefiting local businesses. For every $1 increase in the minimum wage, low-income households spend an additional $2,800 annually. According to the UC Berkeley Labor Center, taxpayers also benefit because of significant declines in state and federal government expenditures for food stamps, school lunches, housing assistance, Medicaid and Children’s Health Insurance programs.

Early next year, the Sonoma County Board of Supervisors will consider applying a cost-of-living adjustment and raising the base county living wage by $5 an hour to $23.15, comparable to the living wage rate adopted by Santa Cruz County. According to the Massachusetts Institute of Technology’s living wage calculator, updated annually based on the cost of living, two parents, each working full-time to support two children, must earn more than $34 an hour to pay for necessities without relying on government assistance. The state minimum wage, which rises to $16.50 an hour on Jan. 1, is less than half an actual livable wage for Sonoma County.

The Berkeley fast-food study suggests that the increased costs of raising the living wage rate for 1,700 workers employed by county contractors, part-time county workers, and county airport and fair workers will be modest and manageable. The evidence also indicates that raising the county wage floor will yield substantial benefits for workers, local businesses and taxpayers.

Martin J. Bennett, an instructor emeritus at Santa Rosa Junior College, is a consultant for UNITE HERE Local 2.

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