Our story to this point: California has been elevating its minimal wage for the previous decade, beginning at $8/hour by way of 2013. Many quick meals staff (particularly) obtained bumped to $20/hour, from $16, in April (the regulation could be very particular about who’s eligible for the rise). Over that decade, with its minimal wage rising, California’s quick meals business has bested the remainder of the US by leaps and bounds. Shocked?
The newest elevate was adopted by intense hand wringing and predictions of disaster by the self-interested house owners of quick meals eating places. They donated cash to the standard suspects to make the case that this may quickly result in devastation in employment and wages.
To show their level, numerous pleasant commentators, teachers, and employed weapons all wrote countless white papers, Op-Eds and commentaries. Hey, everyone’s entitled to their opinion about new laws and there was no shyness about sharing theirs.
However they made one super-sized mistake: they cheated with the numbers. They ignored seasonality; they blended the match knowledge from fully completely different knowledge units; they cherry, picked beginning and cease dates for his or her evaluation that bore no relationship to the underlying financial developments.
We referred to as out their hearth hose of bullshit for what it was; that was adopted by mainstream protection, finally main to 5 separate papers being withdrawn by Hoover, in addition to some great journalism in LA Instances articles by Michael Hiltzik.
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The echo chamber wound up with copious quantities of egg on its face for advancing a bogus narrative about how California’s lately enacted minimal wage regulation for quick meals (QSR) staff impacted employment for that cohort.
Our story started in March with a Wall St. Journal (restaurant) reporter who inappropriately used non-seasonally adjusted numbers to make the following claim:
“California had 726,600 individuals working in fast-food and different limited-service eateries in January [2024], down 1.3% from final September [2023], when the state backed a deal for the elevated wages.”
A little bit of fast math: 726,600/0.987 = 736,170 (start line). 726,600 – 736,170 = -9,570. And so a whopper of a lie that California had “misplaced virtually 10k QSR jobs” was born. That error-laden, deceptive story was written up by UCLA and Hoover Establishment economist Lee Ohanian. From there, a full web page advert was run by CA commerce group CABIA, and from there it went completely viral.
Besides none of it was true.
Ultimately, Hoover took the extraordinary step of retracting its story, together with 4 others (5 whole we’re conscious of) that relied on equally flawed evaluation. The Journal, to its nice discredit, refused to budge, telling me “the figures that the Journal printed are correct…“. Properly, sure, they have been. They have been simply wholly inappropriate in that circumstance.
So, that bubble having been burst, what was the precise to do?
Properly, alongside comes the Employment Insurance policies Institute (EPI) with a fresh analysis of different BLS data set, the Quarterly Census of Employment and Wages (QCEW). QCEW is very regarded for being as thorough and correct a knowledge set as BLS produces; as such, it’s produced with a reasonably hefty lag (some six months or so).
NOTE: EPI’s evaluation – and mine – is targeted on NAICS 722513, Limited Service Restaurants.
The crux of EPI’s new declare is that this:
For the reason that passage of AB 1228 in September 2023, California’s privately-owned quick meals restaurants5 have misplaced -6,166 jobs (-1.1%) by way of June 2024 (the newest obtainable knowledge). [Ed. Note: To be clear, while the law passed in Sept 2023, it did not take effect until April 2024.]
To my eye to this point, the EPI numbers seem to take a look at, so I gained’t quibble with them except/till I discover a mathematical or analytical error. I’ll, nevertheless, make a few substantive factors by the use of rebuttal:
Correlation will not be causation. We should always all the time resist the low hanging fruit declare of x occurred, then y occurred, ergo x induced y. Economies are extraordinarily dynamic, ever-changing on a day-to-day foundation. It’s straightforward, and sometimes very handy, to say a trigger/impact relationship the place one might or might not exist. So it has all the time been with minimal wage. We noticed this play out a decade in the past in Seattle, which did high quality, thanks, after what was a then-groundbreaking enhance in its minimal wage. This feels lots like that.
Most significantly, nevertheless, I might say this: Within the context of QSR institution and employment progress over a decade, California has smoked the remainder of the nation – left it within the mud. The truth that California has trounced the remainder of the nation over the course of a decade tells me way more than a comparatively small loss over the course of three quarters. Three quarters doesn’t essentially a development make; forty is a special story.
Let’s take a look:
Over the ten 12 months interval from 2014 to 2023, CA has grown its QSR workforce by 31.5% to solely 19.5% for the US ex-CA:
By way of QSR institution progress, the story is nearly the identical, however a bit extra dramatic: CA has grown its QSR institutions by 40.8% to simply 18.8% for the US ex-CA:
Let’s word for the report that California was rising its QSR business – employment and institutions – far in extra of what the remainder of the US was doing whereas elevating its minimal wage all alongside the best way (see graphic up prime). So, the query should be requested: How’d CA pull off such vital progress in its QSR business whereas paying individuals increasingly more and extra? At each level alongside the best way, each entrepreneur/franchisee knew what he was up towards and took the plunge regardless.
I didn’t know the historical past of CA’s minimal wage (above) till I undertook to put in writing this put up. That undeniable fact that it’s gone up repeatedly over the previous decade whereas the (allegedly) cost-sensitive QSR business has thrived ought to inform us all we have to know. But this battle will proceed to be waged, info be damned.
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A number of closing ideas.
The SF Chronicle ran a piece in October citing an academic study that had a usually optimistic tackle the brand new minimal wage:
“Wages elevated by 18%, employment numbers remained secure, and menu costs elevated by solely 3.7% — the equal of a 15-cent enhance on a $4 burger. The $20 hourly wage ground represents a rise of $4 per hour from the statewide minimal wage of $16 in California.”
The Chronicle additionally famous the next in regards to the Financial Insurance policies Institute:
“The outcomes [of the study] defy plenty of the doom-and-gloom predictions made when Gov. Gavin Newsom signed AB1228 again in September 2023. Lots of them originated with a survey carried out by the Employment Insurance policies Institute, a suppose tank based by a former restaurant business lobbyist named Richard Berman — as soon as described by TIME Journal as “the wage warrior” who “has been publicly railing towards the very thought of a minimal wage since a minimum of the late Eighties.””
And a Business Insider piece noted:
“Restaurant executives advised Enterprise Insider that California’s new $20 minimal wage for fast-food staff has a minimum of one clear silver lining for his or her companies: Higher-quality candidates are making use of for jobs.”
And, lastly, from the supply of the preliminary error that kicked this all off, WSJ reporter Heather Haddon tells us that “Mandated pay boosts for staff are serving to scale back turnover at chains,” and that needs to be a very good factor.
Beforehand:
Never Mix Payroll and Household Survey Data (November 29, 2024)
Misunderstanding Seasonal Adjustments
See additionally:
The fast-food industry claims the California minimum wage law is costing jobs. Its numbers are fake (June 12, 2024)
Can Stanford tell the difference between scientific fact and fiction? Its pandemic conference raises doubts (Oct. 15, 2024 )
Sources:
Comparing employment from the BLS household and payroll surveys
California’s Businesses Stop Hiring, Lee Ohanian, Hoover, August 7, 2024
What’s the impact of California’s minimum wage hikes? Economist behind new study says there’s consensus (San Fran Chronicle, October 20, 2024)
Silver Lining in CA’s New Minimum Wage (Enterprise Insider, June 14, 2024)
A Day in the Life of a California Fast-Food Manager Who Makes Up to $174,000 (Wall St. Journal, June 17, 2024)
