California’s minimum wage hike cost 18,000 fast-food jobs as employment ticked up in other states – Reason Magazine

 

Report on California Assembly Bill 1228: An Analysis of its Impact on Sustainable Development Goals

Introduction and Legislative Overview

In September 2023, California enacted Assembly Bill 1228, a legislative measure with significant implications for the state’s fast-food sector and its alignment with global development objectives. The law’s primary provisions are:

• The establishment of a Fast Food Council within the Department of Industrial Relations to oversee industry standards, contributing to SDG 17 (Partnerships for the Goals).
• An increase in the minimum wage for approximately 500,000 fast-food workers from $16.00 to $20.00 per hour, effective April 1, 2024.

Proponents celebrated the law as a landmark achievement for labor rights, with Governor Gavin Newsom stating it was “one step closer to fairer wages…by giving hardworking fast-food workers a stronger voice and seat at the table.”

Advancements in SDG 1 (No Poverty) and SDG 10 (Reduced Inequalities)

A.B. 1228 directly addresses key targets within the Sustainable Development Goals, particularly those focused on poverty alleviation and equitable economic outcomes.

1. SDG 1: No Poverty: By mandating a higher wage, the law aims to increase the disposable income of low-wage workers, providing a critical buffer against poverty.
2. SDG 10: Reduced Inequalities: The wage increase is a direct mechanism to reduce income disparity. For employees who retained their positions, gross earnings increased by an average of 12.5 percent, even with a reduction in hours worked.

Complex Outcomes for SDG 8: Decent Work and Economic Growth

The legislation’s impact on SDG 8, which promotes “full and productive employment and decent work for all,” presents a more nuanced picture, revealing both progress and significant setbacks.

Positive Impacts on Decent Work

The bill’s core objective—to secure “fairer wages”—aligns with the “decent work” component of SDG 8. A working paper by the National Bureau of Economic Research (NBER) confirmed that the law successfully increased wages in California’s fast-food sector by 8 percent relative to the rest of the United States.

Negative Impacts on Employment and Economic Stability

Despite the wage gains for some, the policy has led to unintended consequences that challenge the “full and productive employment” target of SDG 8. Research has identified several adverse economic effects:

• Job Losses: The NBER paper estimates that the policy resulted in a loss of approximately 18,000 jobs that would have otherwise existed. California’s fast-food employment decreased by 2.64 percent, while it grew by 0.10 percent elsewhere in the U.S. during the same period.
• Employment Contraction: When accounting for pre-existing growth trends, California’s fast-food industry employment contracted by an estimated 3.2 to 3.5 percent relative to national benchmarks.
• Reduction in Hours: The Employment Policies Institute (EPI) found that the median usual weekly hours for fast-food employees fell from 40 to 35 after the wage increase took effect. This reduction represents a significant loss in potential income and work stability for affected employees.

Conclusion: A Case Study in Policy Trade-offs for the SDGs

Assembly Bill 1228 serves as a critical case study in the implementation of policies aimed at achieving the Sustainable Development Goals. While the legislation successfully advanced objectives related to higher wages under SDG 8 and reduced inequality under SDG 10 for a segment of the workforce, it simultaneously created negative outcomes for employment and economic stability, undermining the goal of “full and productive employment.” The loss of 18,000 jobs and the reduction in working hours highlight the complex trade-offs inherent in pursuing wage-centric policies without fully mitigating potential adverse impacts on overall employment levels.

SDGs Addressed in the Article

SDG 8: Decent Work and Economic Growth

• The article’s central theme is the impact of California’s Assembly Bill 1228, a law that increased the minimum wage for fast food workers. This directly relates to the goal of promoting “decent work” through fair wages. The article quotes Gov. Gavin Newsom celebrating the bill as “one step closer to fairer wages.” However, it also discusses the negative economic consequences, such as job losses and reduced working hours, which are critical aspects of “economic growth” and “full and productive employment.”

SDG 10: Reduced Inequalities

• The law specifically targets a low-wage sector to increase the income of its workers, which is a policy measure aimed at reducing income inequality. The bill is described as giving “hardworking fast-food workers a stronger voice and seat at the table,” which aligns with the goal of empowering and promoting the social and economic inclusion of all. The wage increase from $16 to $20 per hour is a direct attempt to reduce the gap between low-wage workers and others.

SDG 1: No Poverty

• Increasing the minimum wage is a key strategy for poverty reduction. By raising the hourly wage for 500,000 workers, the policy aims to lift the income of individuals and families who may be living at or near the poverty line. The article notes that workers who kept their jobs saw a “12.5 percent” increase in gross earnings, which contributes to this goal. However, it also highlights that job losses and reduced hours could negatively impact the financial stability of other workers, complicating the overall effect on poverty.

Identified SDG Targets

Targets under SDG 8: Decent Work and Economic Growth

1. Target 8.5: “By 2030, achieve full and productive employment and decent work for all women and men… and equal pay for work of equal value.”
   • The article directly addresses this target by discussing the implementation of a $20 per hour minimum wage, which is a policy for “fairer wages.” The analysis of the law’s consequences, including the finding that it caused “a loss of 18,000 jobs” and a reduction in average weekly hours, speaks directly to the challenges of achieving “full and productive employment” and “decent work.”

Targets under SDG 10: Reduced Inequalities

1. Target 10.4: “Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality.”
   • Assembly Bill 1228 is a clear example of a “wage policy” as described in this target. The article details the law’s intent to provide “fairer wages” and give workers a “stronger voice,” which are actions designed to achieve greater equality for a specific segment of the workforce.

Targets under SDG 1: No Poverty

1. Target 1.2: “By 2030, reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions.”
   • The wage increase from $16 to $20 per hour is a policy intervention aimed at increasing the income of low-wage workers, a primary method for reducing poverty. The article’s finding that some workers experienced a “12.5 percent” increase in gross earnings supports this target, while the job losses for others show a potential setback.

Implied Indicators for Measuring Progress

Indicators for Target 8.5

• Average hourly earnings: The article explicitly states the minimum wage increased from “$16.00 per hour to $20 per hour.” It also notes that wages in California’s fast food sector increased by “8 percent relative to the rest of the country.” This serves as a direct indicator of pay levels.
• Employment and unemployment rates: The article provides specific data on employment changes. It cites a study finding that “California’s fast food employment decreased by 2.64 percent” and that the law caused “a loss of 18,000 jobs.” This data is a direct indicator used to measure progress towards full employment.
• Hours worked: The article mentions a reduction in working hours as an impact of the law. It states that “the median usual weekly hours decreased to 35” from a previous 40, which is a key metric for assessing the quality and stability of “decent work.”

Indicators for Target 10.4

• Implementation of wage policies: The existence and enactment of Assembly Bill 1228 itself serves as an indicator. The article is centered on this specific “wage policy” designed to affect income distribution.

Indicators for Target 1.2

• Changes in income for low-wage workers: The article provides data that can be used as a proxy indicator for poverty levels. It notes that despite reduced hours, the median worker “still experienced an increase in gross earnings of 12.5 percent.” Conversely, it also calculates “$4,000 in lost potential annual income” for those with reduced hours, providing data points to assess the financial impact on low-income households.

Summary of SDGs, Targets, and Indicators

SDGs	Targets	Indicators Identified in the Article
SDG 8: Decent Work and Economic Growth	Target 8.5: Achieve full and productive employment and decent work for all, and equal pay for work of equal value.	Change in hourly wage (from $16 to $20). Change in employment level (a decrease of 2.64%, loss of 18,000 jobs). Change in median weekly hours worked (decrease from 40 to 35 hours).
SDG 10: Reduced Inequalities	Target 10.4: Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality.	The enactment of a specific wage policy (Assembly Bill 1228).
SDG 1: No Poverty	Target 1.2: Reduce at least by half the proportion of people living in poverty according to national definitions.	Change in gross earnings for minimum wage workers who retained their jobs (an increase of 12.5%). Change in potential annual income due to reduced hours (a loss of $4,000).

Source: reason.com