When a Pay Raise Costs a Job: The Hidden Fallout of $20 Fast-Food Wages

At first glance, a $20 minimum wage sounds like progress. Higher pay, better living standards, fewer workers struggling to make ends meet — it’s an idea that feels both moral and necessary in an era of rising costs. But beneath the promise of bigger paychecks lies a harder question few want to confront: What happens when higher wages make jobs disappear? Across the United States, minimum wage hikes continue to dominate political debates.

Supporters frame them as essential tools to fight poverty, while critics warn of economic consequences that often arrive quietly — through reduced hours, higher prices, or jobs that vanish altogether. Some states are choosing caution. Others, like California, have chosen to test the limits. The results of that test are already sending shockwaves beyond state borders. California’s experience offers a case study that policymakers elsewhere can’t afford to ignore.

On April 1, 2024, California implemented a $20 minimum wage specifically for fast-food workers. The policy applied to large chains with at least 60 locations nationwide, limited table service, and payment made before food is served. The goal was straightforward: raise incomes for one of the lowest-paid sectors in the labor market. But less than a year later, data suggests the outcome wasn’t what advocates promised.

California’s Experiment and Its Job Loss Reality

According to research from the National Bureau of Economic Research, California’s fast-food wage increase coincided with a significant decline in employment. Between September 2023 and September 2024, the state lost an estimated 18,000 fast-food jobs. Compared to the rest of the country, California’s fast-food employment fell 2.7% more — a notable divergence that suggests the wage hike played a major role.

For workers who kept their jobs, higher wages may have offered relief. But for those pushed out of the workforce, the equation looks very different.

Economic reality is blunt: a minimum wage only helps people who remain employed. For workers whose positions are cut, automated, or consolidated, the wage effectively becomes zero. Businesses facing sharp increases in labor costs often respond by reducing staff, limiting hours, or delaying expansion — especially in industries operating on thin margins, like fast food. California’s outcome raises an uncomfortable possibility: policies designed to protect workers may instead be pricing the most vulnerable out of the labor market.

What a $20 Wage Could Mean for Other States

The implications of California’s experience extend far beyond its borders. States in the Pacific Northwest and Mountain West are now watching closely as they debate similar proposals. Washington state already enforces one of the highest minimum wages in the country, with fast-food workers earning $16.66 an hour. The industry employs roughly 100,000 workers statewide. A jump to $20 would represent a 20% increase — a scale large enough to trigger job losses similar to those seen in California.

Higher wages don’t exist in isolation — they ripple through prices, staffing decisions, and consumer behavior.

Research suggests that Washington could lose thousands of fast-food jobs under a $20 mandate. At the same time, diners are already feeling the cost. Studies show eating out in Seattle costs significantly more than in other major U.S. cities, driven in part by higher labor expenses that businesses offset through increased menu prices. For lower-income consumers, that means fewer affordable food options — another unintended consequence of well-meaning policy.

Good Intentions, Costly Outcomes

In states like Idaho, Montana, and Wyoming — where minimum wages are far lower — a sudden jump to $20 would be even more disruptive. Fast-food businesses in these regions operate with smaller margins and less pricing power. The result wouldn’t be higher pay across the board, but fewer jobs, fewer entry-level opportunities, and greater strain on local economies. The debate over minimum wage often centers on morality. But economics demands realism.

The core assumption behind aggressive wage hikes is that higher pay automatically improves worker well-being. California’s experience challenges that idea. When labor becomes dramatically more expensive overnight, businesses adapt — often in ways that hurt the very people policies aim to protect. This doesn’t mean workers don’t deserve fair pay.

It means solutions to poverty and inequality require more nuance than blanket wage mandates. Job training, earned income tax credits, targeted benefits, and economic growth may offer support without eliminating opportunities altogether. If lawmakers truly want to protect fast-food workers, they must consider not just wages — but whether jobs still exist tomorrow. California’s $20 experiment stands as a cautionary tale: when pay rises too fast, work can quietly disappear.