California’s rising minimum wage isn’t just creating hardships for small business — it’s also making life more difficult for the Bay Area’s poor.
Signs of trouble appeared in late January of this year, when rePlanet (the state’s largest recycler) closed 191 of its recycling centers and cut jobs for 278 of its employees. A press release from the company pointed the finger at certain industry-specific factors, including a reduction in state processing fees for recycled materials and a steep drop in the price of aluminum and plastic.
But it wasn’t these factors alone that drove rePlanet’s decision: The closures and layoffs were also caused by the “mandated rise in operating costs as a results of minimum wage increases,” which the company has encountered at the city and state level in California. (California’s minimum wage has risen 25 percent since 2014, and local increases in cities like Oakland, San Francisco and Emeryville have been far steeper.)
The job losses are tragic in their own right, but the closure of recycling centers triggered a secondary consequence.
Earlier this month, The Guardian reported on homeless and poor San Franciscans for whom collecting and returning recyclables is not a pastime, but rather a source of income. One homeless man that the paper interviewed “declines government assistance, preferring to survive on the $40-$50 he can make each day collecting containers.” Another described the collection efforts as his occupation: “This is my job … I never go to shelters. I never go the hospital. I survive by myself.”
The steady closure of recycling centers has put this income source at risk, and the rePlanet closures in January, driven in part by a higher minimum wage, were described as the “greatest blow” of all. Ironically, a wage hike designed to reduce assistance on government may instead increase it. As another street recycler who was interview by The Guardian explained, “When they take this away from me, I’m going to have to go on welfare.”
Unfortunately, this domino effect of a higher minimum wage won’t be limited to recycling centers and the homeless. Dozens of news reports from the past year have chronicled business closures and staffing reductions associated with California’s multiple minimum wage experiments. (Many stories can be viewed at FacesOf15.com.) When business closures and lay-offs create a hostile job market for young adults, they sometimes seek income using less-legitimate means.
A Boston College study of state and federal wage hikes between 1997 and 2010 concluded that affected workers were more likely to lose their jobs, become idle and commit crime. San Francisco’s legislators should pay careful attention to this particular consequence, as The City struggles with a disturbing rise in property crime that even The New York Times has covered.
Young adults who don’t choose to break the law still suffer a lasting negative career impact when they miss out on early employment. A study from economists at the University of Virginia and Middle Tennessee State University finds that young people with a part-time job their senior year of high school earned 20 percent more annually 6 to 9 years after graduation, compared to their counterparts who didn’t work.
Confronted with the direct and indirect consequences of their actions, some ideologically committed legislators look for easy fixes, like subsidized summer job programs, while others continue to deny the obvious. Their actions call to mind George Orwell, who famously called it a “constant struggle” to “see what is in front of one’s nose.”
California legislators should look carefully at the minimum wage evidence in front of their own noses — before it’s too late.