Blue state minimum wage policies taken nationwide would wreck economy after Trump growth

A new study shows how devastating California's minimum wage hike has been on the Golden State's economy, with fresh warnings of the havoc it would wreak on the nation's economy if it gets instituted nationwide.

"A $20 federal minimum wage would squeeze small businesses, reduce hiring, and undermine the kind of broad-based growth that comes from more jobs, more flexibility, and more opportunity," Vance Ginn, president of Ginn Economic Consulting, told Just The News.

California's increase of the minimum wage for fast-food workers to $20 an hour has led to higher menu prices, reduced employee hours, elimination of overtime and benefits, and accelerated automation, according to a report from the University of California, Santa Cruz.

Higher menu prices, reductions in employees' working hours, loss of benefits

The policy, which took effect in April 2024 after the wage rose to $20 an hour from $16 an hour, produced a range of unintended consequences for the industry, researchers said in the March 2026 working paper.

Economics lecturer Stephen Owen, who contributed to the report, said the findings showed "a plethora of negative outcomes such as higher menu prices for consumers, reductions in employee working hours, widespread elimination of overtime and loss of benefits for employees." He added that "further decreases in employee opportunities are being driven by automation and the adoption of labor replacement technologies is accelerating."

Liberal California Governor Gavin Newsom previously said the fast-food wage increase would help workers cope with rising costs. However, a separate analysis by the consultant Berkeley Research Group, cited in coverage of the issue, pointed to about 10,700 fast-food jobs lost in California between June 2023 and June 2024, along with a 14.5% rise in establishment prices following the wage increase.

"The real minimum wage is always $0 for the worker who loses a job opportunity": Consultant says

The UC Santa Cruz researchers noted that while workers earn more per hour, many now work fewer hours per week and face new hurdles qualifying for benefits. Some franchises have cut overtime entirely, the report said. Businesses have responded by testing or installing self-order kiosks, mobile apps, artificial intelligence for drive-thru ordering and other labor-saving technologies.

Ginn, who served as former chief economist of the Trump 45 White House OMB, echoed those concerns and warned: “The real minimum wage is always $0 for the worker who loses a job opportunity because government sets the price of labor above what the market can bear. That’s not pro-worker — it’s politics over paychecks.” 

A related study on Los Angeles hotels, following a separate local minimum wage ordinance for hotel and airport workers signed by Mayor Karen Bass, found that hotels have eliminated or plan to cut about 6% of positions, or roughly 650 jobs.

The report comes as some other cities, including New York, consider similar large minimum wage hikes for service workers. If that happens, and a supporter of this policy becomes the next president, it could be instituted federally. 

A plethora of unintended consequences

A nationwide $20 minimum wage would sharply raise labor costs across service, retail and hospitality sectors but on a grander scale, forcing widespread price hikes, reduced hours and accelerated automation similar to California's fast-food experience. Businesses responding to higher costs have already cut employee opportunities, eliminated overtime and benefits, and installed labor-saving technology, patterns that would scale nationally and slow hiring.

This would undermine the Trump administration's job growth momentum by discouraging entry-level employment, particularly for young and low-skilled workers, while squeezing small businesses operating on thin margins.

Overall economic expansion could stall as consumer prices rise, hours decline for many workers, and investment shifts away from labor-intensive industries.

Coupled with many companies' pressure to institute cheap workarounds like artificial intelligence, the wage hike would squeeze out workers who rely on entry and mid-level jobs to survive.