Estimating the impact of California’s $20 fast-food minimum wage on Medi-Cal eligibility

Introduction

California’s AB 1228 took effect on April 1, 2024, increasing the minimum wage for many of the state’s fast-food workers to $20 an hour. The legislation also established an 11-member Fast Food Council, made up of employers, workers, and government representatives, charged with creating standards for wages, working conditions, and training in the industry. AB 1228 aims to improve job quality in an industry that employs over 700,000 people in the state, a sizable number of whom experience low pay, underemployment, irregular work schedules, wage theft, and health and safety issues (Huang et al. 2021; Schneider and Harknett 2022). These experiences are disproportionately felt by women and workers of color, who make up a majority of the fast-food workforce in California (Huang et al. 2021).

Early research on the effects of AB 1228 shows the new minimum wage increased fast-food workers’ wages, while modestly increasing prices for customers without reducing employment (Reich and Sosinskiy 2024). Additional research on the early impact of AB 1228 shows no significant evidence of employers using strategies such as decreasing workers’ hours, increasing just-in-time scheduling, or increasing understaffing in response to the new minimum wage (Schneider, Harknett, and Bruey 2024).

Our report adds to this early body of research on the impact of AB 1228 by estimating how eligibility for Medi-Cal–one of the largest social safety net programs in California–might change for workers covered under this law. From this, we also estimate potential reductions in federal and state Medi-Cal spending. Fast-food workers losing Medi-Cal coverage due to higher earnings can take up an employer-sponsored health insurance plan assuming one is offered, they are eligible, and the plan is affordable. Alternatively, workers can enroll in a subsidized plan through Covered California. We consider two example premium cost scenarios for single adult fast- food workers switching from Medi-Cal to Covered California.

Nationally, data show that fast-food workers are less likely to be enrolled in, offered, or eligible for employer-sponsored insurance. The lack of employer coverage, combined with low wages in the industry, results in heavy reliance on Medi-Cal and other public programs by fast food workers (Huang et al. 2021).

We estimate that due to the increase in the fast-food minimum wage:

• Between 41,300 and 73,800 fast-food workers enrolled in Medi-Cal will no longer earn wages low enough to be eligible for the program.
• Associated reductions in combined federal and state spending could be between $303.7 million and $523.1 million. State spending alone on Medi-Cal could decrease between $38.7 million and $66.6 million.
• For many workers who switch from Medi-Cal to Covered California, the pay increase from the $20 minimum wage should more than cover premium expenses.

Read the full report.