Report on the Socioeconomic Impacts of California’s Minimum Wage Increase and its Alignment with Sustainable Development Goals

Introduction and Policy Context

In April 2024, the state of California implemented a new law mandating a $20 per hour minimum wage for fast-food sector employees, an increase from the previous $16 per hour. This report analyzes the initial effects of this policy, with a specific focus on its alignment with and impact on the United Nations Sustainable Development Goals (SDGs), particularly SDG 1 (No Poverty), SDG 8 (Decent Work and Economic Growth), and SDG 10 (Reduced Inequalities).

Analysis of SDG 8: Decent Work and Economic Growth

The policy’s implementation has shown a direct correlation with several negative indicators related to SDG 8, which promotes sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all. The primary findings indicate a contraction in employment opportunities and a reduction in the quality of existing jobs.

• Employment Decline: A National Bureau of Economic Research working paper found that the wage increase led to a 2.7% decline in employment within California’s fast-food sector, which translates to an estimated loss of 18,000 jobs.
• State Unemployment Figures: California’s unemployment rate stands at 5.3%, lagging behind the national average of 4.1%. The fast-food minimum wage policy is cited as a contributing factor to this disparity.
• Deterioration of Work Conditions: For those who retained their jobs, conditions have reportedly worsened, challenging the “decent work” aspect of SDG 8.
  1. 89% of the state’s fast-food workers have had their work hours reduced.
  2. 35% of these workers have experienced a reduction in their supplemental benefits.

Assessment of SDG 1 (No Poverty) and SDG 10 (Reduced Inequalities)

While minimum wage policies are often designed to advance SDG 1 and SDG 10 by increasing the income of low-wage workers, the observed outcomes in California suggest potential adverse effects on these goals. The policy has resulted in higher costs that disproportionately affect low-income households.

• Increased Consumer Costs: The policy’s impact on labor costs has been passed on to consumers. Menu prices at California restaurants increased by 14.5% between September 2023 and December 2024, nearly double the national rate of 8.2%.
• Impact on Low-Income Families: Research from Morning Consult identifies low-income families as the core consumers of fast food. Therefore, significant price increases directly impact the disposable income and food security of the very demographic the policy aims to help, potentially hindering progress on SDG 1.
• Challenges to Reducing Inequality: The combination of job losses, reduced hours, and higher consumer prices for essential goods suggests that the policy may inadvertently exacerbate economic instability for low-income populations rather than reducing inequality as intended by SDG 10.

Conclusion and Policy Implications for Sustainable Development

The initial data following California’s fast-food minimum wage increase indicates a conflict with the objectives of key Sustainable Development Goals. The negative impacts on employment and work conditions directly challenge the principles of SDG 8 (Decent Work and Economic Growth). Furthermore, the resulting price inflation for consumers, particularly low-income families, undermines the policy’s potential to contribute positively to SDG 1 (No Poverty) and SDG 10 (Reduced Inequalities). The evidence suggests that businesses, especially small franchise operations with slim profit margins, mitigate increased labor costs by reducing staff, hours, and benefits, and by raising prices. For sustainable development, policymakers may need to consider alternative strategies that focus on fostering conditions for job creation and upward economic mobility beyond mandating wage floors.

Which SDGs are addressed or connected to the issues highlighted in the article?

Explanation

The article discusses the economic consequences of a minimum wage increase, focusing on employment, income, and consumer costs. These themes directly relate to several Sustainable Development Goals that target poverty, economic well-being, and equality.

• SDG 1: No Poverty: The article explores how a policy intended to help low-income workers can inadvertently increase their financial hardship through job loss and higher prices for essential goods, which is central to the goal of eradicating poverty.
• SDG 8: Decent Work and Economic Growth: This is the most relevant SDG, as the article’s core argument revolves around the negative impacts on employment (“loss of 18,000 jobs”), working conditions (“work hours reduced”), and overall economic stability in the fast-food sector.
• SDG 10: Reduced Inequalities: The article addresses this goal by questioning the effectiveness of minimum wage hikes in reducing income inequality. It argues that the policy disproportionately harms low-income families, both as workers who lose jobs and as consumers facing higher prices, potentially worsening inequality.

What specific targets under those SDGs can be identified based on the article’s content?

Explanation

Based on the specific issues raised in the article, several SDG targets can be identified as being directly affected by the minimum wage policy and its outcomes.

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 forms according to national definitions. The article suggests that the policy is counterproductive to this target. By causing job losses and increasing the cost of food, it pushes the “working poor” and “low-income families” into greater financial precarity, rather than alleviating poverty.
2. 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 challenges the progress towards this target. It provides evidence of declining employment (“employment in the state’s fast-food sector to decline by 2.7 percent”), which is the opposite of “full and productive employment.” Furthermore, the reduction in work hours for 89% of workers and reduced supplemental benefits for 35% indicates a move away from, not towards, “decent work.”
3. Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40 per cent of the population at a rate higher than the national average. The article implies this target is being undermined. While the wage rate increased, the loss of jobs, reduction in hours, and higher consumer prices that “hit them the hardest” suggest that the net income and purchasing power of the lowest earners are likely decreasing, not growing.

Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Explanation

The article provides several specific data points and statistics that can serve as direct or implied indicators for measuring progress (or lack thereof) toward the identified targets.

1. Indicator 8.5.2: Unemployment rate. The article explicitly mentions this indicator, citing California’s unemployment rate of 5.3% compared to the national rate of 4.1%, and links the state’s higher rate to policies like the minimum wage hike.
2. (Implied) Change in employment levels in a specific sector. The article states that the wage increase “caused employment in the state’s fast-food sector to decline by 2.7 percent,” which translates to “a loss of 18,000 jobs.” This serves as a direct measure of the policy’s impact on employment under Target 8.5.
3. (Implied) Change in working hours and benefits. The statistics that “89 percent, have had their work hours reduced” and “35 percent have seen their supplemental benefits reduced” are clear, quantifiable indicators of the quality and decency of work (Target 8.5).
4. (Implied) Consumer price inflation rate. The article notes that menu prices “rose 14.5 percent” and that this increase disproportionately affects low-income families. This can be used as an indicator to measure the real-world impact on poverty (Target 1.2) and inequality (Target 10.1), as it erodes the purchasing power of the most vulnerable groups.

Table of SDGs, Targets, and Indicators

Source: cei.org