While minimum wage increases are appealing in principle, a recent study by researchers in the Department of Economics at Texas A&M University found the negative impacts of higher wages might outweigh the positives.
Dr. Jonathan Meer, Texas A&M economics professor and department head, Olivia Edwards, fifth-year economics Ph.D. candidate, and Jeffrey Clemens, economics professor at the University of California, San Diego, published a working paper in July 2025 analyzing the adverse economic effects of California’s recent minimum wage increase.
California Assembly Bill 1228 raised California’s minimum wage from $16 to $20 per hour for fast-food restaurant chains in at least 60 locations nationally, with some exemptions. The increase was one of the largest one-time minimum wage increases in U.S. history, Edwards said.
Raising the minimum wage only affected some fast-food restaurant chains, but Edwards explained that restaurants that were not mandated by the assembly bill would follow suit by increasing wages to remain competitive in attracting employees.
“You can imagine there might be equilibrium effects,” Edwards said. “If I have the choice between working at a chain like Blue Baker versus McDonald's, and McDonald's has a $20 per hour minimum wage, and Blue Baker's only at $16 an hour, I'm going to choose McDonald's.”
Using the Quarterly Census of Employment and Wages from the U.S. Bureau of Labor Statistics, the group collected data from years predating the increase and compared it to employment from September 2023 to 2024.
After analyzing employment data in other states during the same period, they discovered, after implementing higher minimum wages, California’s fast-food employment declined significantly, at an estimated loss of 18,000 jobs.
“Following AB 1228’s enactment, employment in California’s fast-food sector fell, with estimates ranging from 2.3% to 3.9% across specifications, even as employment in other sectors of the California economy tracked national trends,” according to the group’s research.
California can be a weird place, Edwards explained. To ensure that the group’s findings were taking place because of the enactment of AB 1228 rather than an anomaly, the group used a triple difference, adding a third dimension of comparison to ensure accurate results. They analyzed differences in employment between the fast-food sector compared to other employment types, such as factory work and white-collar jobs.
Before the implementation of AB 1228, California’s employment in the fast-food sector was following national trends. As fast-food employment began to decline after a minimum wage increase, white-collar employment in California — and other industries — continued to follow national trends, proving that the fall in fast-food employment was due to wage increase legislation.
The findings are consistent with what economic theory predicts, Edwards explained. These are the same principles taught in Economics 202, which covers the elementary principles of economics. “When prices are higher, you want less of something, not the other way around,” she said. “The same thing applies to labor.”
When a person is more expensive to hire, restaurants are less likely to hire more workers, resulting in an overall loss of employees.
The research received national attention when it was published in an Op-ed for the Wall Street Journal. Edwards said it was humbling as a young researcher to be featured in this way. “It's real-world stuff, and it makes a real-world impact,” Edwards said.
The group’s research was also cited by Australia’s Fair Work Commission in it’s research reference list for the 2026 Annual Wage Review, which investigates and reports on minimum wage objectives.
Seeing the application of the group’s work in these contexts, Edwards appreciated that the research was not in a vacuum. “It doesn’t feel like the research exists just as an academic exercise,” she said. “They're taking our research into consideration as they look to make new policies.”
The research group recently published a follow-up working paper, analyzing the price effects of California’s minimum wage increase, which can be found here: The Effects of California's $20 Fast Food Minimum Wage on Prices