The Minimum Wage Claims You Keep Hearing Are Totally Fake. We Can Prove It.
In September 2023, California passed a law to bring fast food workers’ minimum wage up from $16 to $20 an hour. A flurry of reports predictably followed from the likes of The Wall Street Journal, Employment Policies Institute, and the Hoover Institution claiming that restaurants and other businesses were already laying off workers based on the new law.
The Hoover Institution, a think tank with $879.8 million in total assets, continued to dig in against AB 1228, publishing multiple articles over the past year attempting to pin “lost jobs” on rising wages. At the heart of the research are three major claims made by Lee Ohanian, an economist at UCLA and senior fellow at The Hoover Institution:
Government jobs account for 96.5% of job growth in California over 2.5 years,
California lost 410,000 jobs from February 2020-February 2024, and
California lost 10,000 jobs in the fast food sector since the minimum wage law was signed in September 2023.
All three claims are false, and the Hoover Institution has now had to retract six articles based on faulty research by Ohanian. The claims were first debunked by Invictus, an anonymous poster—using the same publicly available data that Ohanian used as source for his analysis. In reality,
Between January 2022 and June 2024, private-sector jobs accounted for the majority of job growth in California, at 77.8%
California did not lose any jobs between February 2020 and Feburary 2024; it actually gained 290,000 jobs
California’s fast food sector has seen consistent growth, both in terms of jobs and the total number of establishments, outpacing national averages.
Why is the Hoover Institution so committed to publishing articles they end up needing to retract? The think tank, which is part of Stanford University and is headed by former Secretary of State under George W. Bush, Condoleezza Rice, describes its economic research as, “aimed at developing solutions that foster economic freedom”—a euphemism for unbridled capitalism that leaves workers underpaid and overworked. Being part of the university shields the Hoover Institution from needing to reveal the amounts given by individual donors, but its board of overseers includes some of the biggest names in corporate America, including Rupert Murdoch, Rebekah Mercer, and Harlan Crow—known for his relationship with Supreme Court Justice Clarence Thomas.
Notably, the Hoover Institution has received grants from the Rescue California Education Foundation, headed by John Cox. Cox ran in California’s 2018 gubernatorial race against Gavin Newsom, who signed AB 1228 into law. Notably, Prager University received the same grant from Cox’s foundation in 2021. During his bid for governor in 2018, Cox said, “The real, true minimum wage ... should be zero. It should be set between the employer and the employee.”
Long before AB 1228 was introduced, the Hoover Institution regularly published articles insisting minimum wage increases cause job losses. And for years, Ohanian, who is also on the board of America First Policy, has been at the forefront of the narrative insisting minimum wage increases cause job losses in California, dating back to his 2008 article, “The Implications Of a Minimum Wage.” In 2019 he wrote, “Minimum Wage Laws Hurt Those They Claim to Help” and in 2022, “New California Law Will Cripple Its $20 Billion Fast-Food Industry.” While analysis shows that the fast-food industry growth in California has outpaced the rest of the country, Ohanian’s articles over the past year have attempted to argue the opposite, based on mixing apples and oranges of datasets.
In its 2024 fiscal year, “total operating expenditures were $113.1 million,” at The Hoover Institution. “Compensation for scholars and staff represents the largest portion of the operating budget, accounting for more than 70 percent of total expenses,” they noted in their annual report.
Drop Site News asked Invictus how much money is behind his operation, “As for my compensation, it has a lot of zeros in it. In fact, every number is a zero. It’s nil.” Invictus, who is known for debunking the claim that over 1 million jobs were added in a month under Reagan, sees himself as a kind of David to the goliath of conservative economic lobbyists. He regularly publishes analysis for The Big Picture, a finance blog run by Wealth Manager Barry Ritholtz, and his work has led to corrections being issued on analysis published by The Washington Post.
“I do it because the truth still matters to me and I believe there’s a tendency–much more on one side than the other–to see what misinformation can be successfully peddled without consequences or accountability,” said Invictus.
Indeed, looking at the repeated mistakes by Ohanian in detail, it appears the Hoover Institution is dedicated to publishing analyses that support its ideological goals, regardless of their integrity. Neither the Hoover Institution nor Ohanian replied to a request for comment.
Claim 1: Government Jobs Account for 96.5% of Job Growth in California Over 2.5 Years
Ohanian published this claim in a study funded by the Hoover Institution in August: “Between January 2022 and June 2024, total California jobs grew by about 156,000, with government jobs accounting for 96.5 percent of that growth.” Bloomberg ran a story shortly after that reporting on his claims. In late November, this claim went viral. Posts on X, citing the Hoover Institution and repeating the 96.5% figure, have over 135,000 views. Other posts have echoed the false claim, unsourced, garnering over 735,000 views.
Bloomberg first ran a story reporting on the claims in Ohanian’s study on August 8, 2024. On November 26th, Katy Grimes, Editor for the California Globe, ran an article titled, “96.5% of New Jobs in California This Year Were Government Jobs,” with the accompanying subtitle, “Apparently California is already a Socialist state.”
Three days later, on November 29th, Invictus published his breakdown of Ohanian’s analysis, in which he corrected the record on California job numbers: California, he wrote, actually “added 523,700 private sector jobs over the period that Professor Ohanian claims they added only 5,400,” he wrote.
His numbers are consistent with data published by the Bureau of Labor Statistics (BLS), while Lee Ohanian’s are not. In his analysis, Ohanian made a very basic error: “The calculation for California private-sector jobs is derived from total jobs minus California government jobs,” he writes. For “total jobs,” he uses Current Population Statistics (CPS) data, while for “government jobs,” he uses Current Employment Statistics (CES) data.
The problem is that these two numbers come from completely different surveys and measure different things. CPS data are widely used to measure employment levels (how many people are working). By contrast, CES data are relied on to measure the total number of jobs in an economy. There are major differences between CPS and CES data. CPS counts unpaid family workers, while CES does not. CPS counts workers on leave without pay, while CES does not. CPS counts agricultural workers, but CES only captures non-farm payroll employees. CPS counts private household workers like nannies and teachers, CES does not. In one key difference, those holding multiple jobs are counted once by CPS, while CES counts each job individually.
Mixing CPS and CES data will not produce a result representative of reality. It’s the mathematical equivalent of a grocery store manager asking how many oranges are in stock, and the cashier deciding to subtract the amount of apples sold that day from the number of oranges in stock at the beginning of the day. Yet the computer system already has a clear count of oranges currently in stock that could have easily been used.
This December, Ohanian retracted his claim from August 7, 2024, that government jobs account for 96.5% of job growth in California over 2.5 years, from January 2022-June 2024.
Following Ohanian’s retraction, Bloomberg updated their story on December 12:
“Corrects article that ran Aug. 8, 2024, after the Hoover report cited in the story was corrected and updated by its author, who said he incorrectly interpreted employment data for the state. This version corrects the headline, the second paragraph and removes all references to the erroneous analysis, including a chart.”
One would expect that an economist working with BLS to be able to make this distinction. “I discuss innumeracy, incompetence, and bad faith all the time. Hard to know exactly what’s at play,” Invictus said.
Replicating Ohanian’s calculation with BLS data, as Invictus did, produces the same wrong answer.
First, take the CPS total employment level for January 2022. Subtract the CES count of government jobs from January 2022. That is how Ohanian got his number for total “private jobs” in California for January 2022. He repeated this again for June 2024. To assess how many “private jobs” California added over the 2.5 years, he subtracted the total “private jobs” in January 2022 from June 2024, to arrive at 5,416. Rounding this yields Ohanian’s exact number, 5,400.
This calculation is not only wrong – it is unnecessary; BLS directly releases numbers on total private sector jobs as a part of the CES data set. In January 2022, there were 14,867,500 total private jobs in California. The total for June 2024 is 15,390,500—an increase of 523,000 private sector jobs over 2.5 years.
Going a bit farther than Invictus, now: To get to 96.5% figure, it appears Ohanian subtracted the 5,416 “private jobs” from the total employment level change from January 2022 to June 2024 from the CPS dataset. The California employment level in January 2022 was 18,190,526, and 18,346,242 in June 2024, a difference of 155,716. It appears Ohanian then subtracted his false count of 5,416 private jobs, to arrive at 150,300. He treated this as government job growth. Then, he divided this by “total job growth,” or the total employees increase from the CPS data, 155,716. This produces an identical result: 0.965218, or 96.5%.
In reality, according to the CES data, private sector jobs accounted for 77.8% of job growth in California over 2.5 years, representing 523,000 of the 672,300 jobs added. No small error. “He was only off by a factor ~100x,” Invictus remarked.
Claim 2: California Lost 410,000 Jobs from February 2020-2024
On April 9, 2024, The Hoover Institution published another article by Lee Ohanian: “California Has Lost 410,000 Jobs. With a New Bill, More Could Be on the Way Out.” Again, Ohanian used the total employment figure from the CPS dataset and treated it as a measure of total jobs.
In February 2020, the California employment level was 18,732,265, and 18,321,648 in February 2024, a difference of 410,617. Again, the CPS data is not measuring actual jobs, so it should never be used for this calculation. The CES data shows a gain of 290,000 jobs from February 2020 to 2024.
After Invictus pointed out Ohanian’s misuse of BLS data from August, the Hoover Institution retracted this article as well, with the note that the data included, “was incorrectly identified and interpreted by the author and the original publication has been retracted to avoid any misinformation that can be attributed to the article.” Yet, the claim remains in circulation. The Independent Institute, a public policy research organization that, “adheres to the highest standards of independent scholarly inquiry,” also published Ohanian’s article, where it remains available under the original headline. The Independent Institute has not replied to a request for comment.
In this instance, Ohanian blamed the source data for his mistake. The body of the article now includes the following statement:
“This piece includes data from two Bureau of Labor Statistics (BLS) surveys, one based on a household survey that measures total job growth for California, and one based on a survey of non-farm establishments, which omits the self-employed and some other categories of employment, and which was mistakenly used to measure total national job growth. While the household survey data can be used to correct this error, the author’s post-publication opinion is that the household survey data are almost certainly understating job growth, both nationally and in California.”
Claim 3: California Lost 10,000 Jobs in the Fast Food Sector Since the Minimum Wage Law Was Signed In September
On March, 25, 2024, Wall Street Journal restaurant correspondent Heather Haddon reported that “California had 726,600 people working in fast-food and other limited-service eateries in January, down 1.3% from last September, when the state backed a deal for the increased wages.” In the months following the publication of Haddon’s article, Lee Ohanian based three separate articles on her reporting in April, June, and October.
But a decrease in jobs between September and January is not unusual—it’s expected. It happens every single year. Haddon failed to consider that employment levels fluctuate because of seasonal work on an annual basis. Using the same data source as Haddon, looking at the job numbers over a decade, it becomes clear that a decrease in the employment level is very typical between September and January:
But comparing the employment level year over year, in January 2023 (before the minimum wage law passed) to January 2024 (after), shows that the California fast food sector actually gained 10,021 jobs.
Invictus identified the error in June. While Ohanian’s publications based on Haddon’s claim have been retracted, the Wall Street Journal has not yet issued a retraction and the narrative is still spreading.
On October 2, 2024, the California Business and Industrial Alliance (CABIA) took out a full-page ad in USA today, “In Memoriam: Victims of Gavin Newsom’s Minimum Wage,” claiming California lost 10,000 jobs after the new minimum wage law passed. Jot Condie, the President of the California Restaurant Association, repeated the false claim during a TV news appearance. The Independent Institute, Fox Baltimore, the National Review, and Washington Examiner all repeated the claim, too.
The Employment Policy Institute: Another Version of the Fast Food Job Loss Claim
AB 1228 passed in September 2023, but it did not go into effect until at least April 1, 2024. Even today, for many fast food restaurants, the $20 minimum wage is still not in effect. Per the law, for any establishment that makes minimum wage changes on an annual basis, the new wage does not take effect until January 1, 2025.
The conservative press explains the “job losses” before the $20 minimum wage was implemented as a response to the law being signed. The Daily Caller’s Ireland Owens had one suggestion, “California restaurants began bracing for the minimum wage increase before the law took effect,” she wrote, this time citing the Employment Policy Institute (EPI).
The EPI report, from December 5, 2024, claimed California’s fast food sector lost 6,166 jobs this year, attributing the decline to the new law. But the BLS data actually show that California’s fast food sector saw record high job numbers this summer, with year-over-year gains of 1,900 jobs this July.
(Source Data: BLS)
Employment levels are actually up 1,900 jobs compared to July 2023 – before the minimum wage law went into effect. June 2024 was the only month this year in which California saw lower job numbers than any month 2023. The California fast food industry saw their highest job numbers ever this July, at over 748,000 jobs. Employment levels are higher than pre-pandemic numbers, up 38,000 from 2019.
That these numbers would come out of EPI, essentially an anti-minimum wage increase think tank, is no surprise. Its founder, Richard Berman, was known as, “The Wage Warrior,” for his fierce opposition to increasing the minimum wage. EPI’s current director is Michael Saltsman, is also an owner of Berman and Company, a Washington D.C. based PR and lobbying firm founded by Richard Berman.
If fast food restaurants were hurting in California, we would likely see slowed growth in the industry. Instead, the number of fast food establishments is on the rise in the golden state.
(Source Data: North American Industry Classification System Code 722513, Limited Service Restaurants, BLS)
In his most recent analysis, Invictus reports that California grew their fast food sector over the past ten years, while raising the minimum wage. Today, at $16 an hour, California’s minimum wage started “at $8/hour through 2013,” Invictus writes.
Invictus analyzed the 10-year period from 2014 to 2023, and found that California’s fast food workforce has grown by 31.5%, outpacing the rest of the country at 19.5%. The number of fast food establishments in California increased by 40.8%, outperforming the rest of the U.S. two-fold—at just 18.8%.
Not only is California’s fast food sector not suffering job losses with the nation’s second highest minimum wage, it has been outperforming the rest of the country.
This is both sad and disgusting to read. I grew up and lived in California for 45 years until I left New Years’s Day 1995. UCLA is part of the State university system and has been known to be very liberal thinking; and Stanford is private and highly respected. That both of these schools would allow professors to publish false information is disgraceful! Having opposing views is what college is about but not misinformation, in this case false information, that took Invictus - a fighter for truth and transparency to point out and be known! This false information so greatly affects other states where not only is minimum wage below $10 p/h but also no benefits at all included in addition to staying on the job lacks advancement, cost of living increases, and still no benefits.
Great reporting! There is so much agenda driven information being fed to the public that you really have to do your homework to tell if you can believe any of it. I am down to Drop Site and a few independent journalists that I find trustworthy at all. Thanks for the integrity.