Sector-Specific Wage Floors and Young Adult Labor Market Outcomes: Evidence from California's AB 1228
Problem
California's AB 1228 raised the fast-food minimum wage to $20 per hour in April 2024 — the first statewide sector-specific wage floor in US history. I asked whether the disemployment predicted by the standard competitive model shows up in the data, and more importantly, whose employment changes under a binding sector-specific floor.
Method
Monthly CPS Outgoing Rotation Group microdata (IPUMS), ages 16–24, January 2022 through September 2025. Primary estimator: two-way fixed effects across all 50 states with state-clustered standard errors and full demographic controls. Triangulation via synthetic control, long differences, a West-Coast DiD with pre-trend diagnostics and placebo tests, a triple-difference against 25–35 year-olds, and QCEW establishment-level evidence including a contiguous-county border design following Dube, Lester, and Reich. Mechanism checks on log hourly wages, log weekly hours, and quantile wage regressions.
Result
The aggregate youth employment effect is small and not robust — the all-state TWFE detects a modest decline that fails pre-trend diagnostics, and the synthetic control returns a near-zero null. Implied employment elasticity is +0.028. Adjustment runs mostly through the intensive margin: wages up 2.1%, hours down 3.8%, with wage gains concentrated at and above the median. The paper's central contribution is compositional — workers without a high school diploma see employment declines while more-educated youth see gains — reframing the policy question from “did aggregate employment fall?” to “whose employment changed?”