California law now provides for an annual adjustment to the statewide minimum wage for inflation. On Jan. 1, 2027, it will jump from $16.90 per hour to $17.40., higher than any statewide minimum wage currently in effect. (In a few cities, the minimum wage is already $20 an hour and in many others it’s dangerously close to that mark.)
It is a wage, said Newsom, “that rewards work, grows the economy, and puts working families first. We believe if you work hard, you deserve a decent paycheck.”
Put aside for the moment that government is in no position to decide what a “decent paycheck” is and let’s look at the employment numbers and marvel at why advocates don’t see the destructive nature of government-instituted wage floors.
At $16.90 an hour, California has one of the nation’s highest state minimum wage rates. At the same time, California’s jobless rate was 5.2%, in June – tied with Connecticut, Oregon and Washington for highest rate among the states, and a full percentage point above the 4.2% national rate. It’s roughly the same rate at the start of the year, 5.4%.
The total number of employed Californians slipped from 18.78 million in January to 18.6 million in June while the labor force contracted from 19.86 million to 19.62 million over the same period — consistent with the flight from California that’s fueled by high taxes, unaffordable housing and a steep cost of living.
There is a direct connection. When wage floors are raised by government, job loss follows.
There’s no better example than the (so far unlearned) lessons of Assembly Bill 1228, which went into effect in April 2024. The legislation set the minimum wage for fast-food workers at chains with more than 60 locations nationwide to $20 an hour and wiped out 18,000 jobs, according to a paper from the National Bureau of Economic Research.
The workers most at risk aren’t corporate executives. They’re teenagers looking for a first job, workers trying to get back into the labor force, and people who need an employer willing to take a chance on someone without much experience.
When the government suddenly makes each hour of entry-level labor more expensive, employers only have so many options: hire fewer people, cut hours, automate more tasks or raise prices.
Prices moved higher, too. Berkeley Research Group found that menu prices at California fast-food restaurants rose 14.5% between September 2023 and October 2024, compared with 8.2% nationally. A separate NBER study estimated that California food-away-from-home prices rose roughly 3.3% to 3.6% relative to comparable metropolitan areas following the law.
Escalating minimum wages can also push employers to scuttle plans to expand their businesses because they cannot afford inflated payrolls. In extreme cases, they shut down their companies. Who knows, some might even leave, relocating in states that aren’t hostile to businesses. And that, we remind the governor, is a “different path” indeed.
Kerry Jackson is the William Clement Fellow in California Reform at the Pacific Research Institute and co-author of The California Left Coast Survivor’s Guide.