Most fast food workers in California got a raise Monday as the state implemented a $20-an-hour minimum wage for the industry.
A Northeastern University economist says such targeted minimum wage increases may be a new strategy in the progressives' toolbox.
“I think what's interesting is that the strategy is new,” says Alicia Modestino, associate professor of economics in the School of Public Policy and Urban Affairs and director of research for the Doukakis Center for Urban and Regional Policy in the Northeast. “Government Gavin Newsom did not raise the state minimum wage. It raised the minimum wage for workers in certain industries, which is a much more targeted and nuanced approach.”
“I think it's an interesting new strategy for progressives to either attempt, or find the political will to raise the minimum wage,” Modestino continued.
On Monday, April 1 a new California law that raised the minimum wage for fast food workers to $20 an hour, the highest guaranteed base wage in the industry.
Democratic leaders billed the law as a recognition that most of the 500,000 Fast food workers are the main gainers for their low-income households.
But Modestino also found the politics involved interesting.
In return for higher pay, labor unions — which have worked to organize fast food workers — dropped their bid to hold fast-food companies liable for wrongdoing by independent franchise operators in the state. The industry, meanwhile, agreed to pull a referendum on workers' wages from the 2024 ballot.
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The law was also passed just before two major events in October. That month, Newsom signed a law increasing the minimum wage for health care workers at $25 an hour; and — a day later — striking Kaiser Permanente health care workers earned a 21% increase in four years to resolve the largest health care labor dispute in US history.
Again, health care workers are raising implied compromise: this time a deal between hospital lobbies and health care provider and labor unions.
Against this backdrop, Modestino notes that the new minimum wage for fast-food workers is interesting for what it didn't do — increase the state minimum wage for all workers from $16.
He says this likely reflects a political calculation that such targeted minimum wage increases are more palatable — “the minimum wage is the most contentious issue in economics you could ever pick,” Modestino says — than a blanket minimum wage increase.
“It probably doesn't have the political will of the state legislature to raise the state minimum wage, but it's also — economically — more efficient,” Modestino says. “You cause a little less financial disruption because it's not the entire state.”
Modestino also notes that the The Roosevelt Institute think tank reported that between 2014 and 2023, fast food prices rose 46.8%, compared to 28.7% for the average of all prices, according to the Bureau of Labor Statistics.
“If the cost structure is such that it justifies a higher wage — like in health care, which has a higher revenue model — and if prices have gone up more in the fast-food industry, then that makes much, much more sense than raising the whole minimum wage for the entire state,” says Modestino.
As for whether other states could see similar strategies, Modestino says she wouldn't be surprised.
“If the push for $20 an hour doesn't work, the push for $25 an hour in health care does. So go with it for now,” says Modestino.
But he adds that $20 an hour may not be the most appropriate goal for all states.
“Raising the minimum wage across the country is something that advocates have pushed for, but it's not that big of a deal to have a one-size-fits-all approach because we have different cost structures in different states,” says Modestino.
“Going to $20 an hour somewhere where the average wage is $10 an hour would put a lot of companies out of business,” Modestino continues. “So allowing states to do these different things and be more flexible makes a lot more sense.”
