Is a $15 minimum wage bad for California’s environment?
Author: Michael Saltsman
Publication Date: August 2019
Newspaper: The Orange County Register
Topics: Living Wage
The Golden State has long prided itself on being a global leader in protecting employees and the environment, but new evidence suggests the state’s “progress” on the employment side is hurting its environmental goals.
California’s minimum wage is rising rapidly toward $15, and the wage floor has already surpassed that level in a number of cities. The consequences for small businesses with narrow margins (and the people they employ) have been as tragic as they are predictable. For each dollar increase in the minimum wage in the Bay Area, a Harvard study found a 10 percent spike in closures for restaurants with average customer reviews. Elsewhere in the state, a University of California Riverside study identified a severe slowdown in restaurant growth.
These impacts on restaurants were expected, but a new victim gained notoriety last week: RePlanet, the state’s largest recycling chain. An early warning sign came three years ago when the company closed 191 recycling centers, citing a reduction in state fees and a steep increase in labor costs. This week, it announced the closure of its remaining 284 centers, marking more than 1,000 lost jobs.
A spokesman for the company stated that, in addition to changes in the market for recyclables, “the rise in operating costs resulting from minimum wage increases and required health and workers’ compensation insurance” made operation unsustainable. RePlanet isn’t alone in reaching this conclusion: Last fall, CBS reported that over 40% of California’s recycling centers closed in the past five years. Beyond jobs lost by workers at these recycling centers, it leaves consumers without the ability to redeem bottle deposits — a $272 million missed opportunity, and one that many low-income Californians depended on.
The fallout from these closures has sullied the state’s “green” reputation. Reports from the California Department of Resources Recycling and Recovery, or CalRecycle, show that recycling rates for plastic and other beverage containers in the Golden State have dipped to their lowest point in over a decade. Prior to RePlanet’s announcement that it would close its remaining facilities on Aug. 6, it was estimated that over 3.5 million additional plastic beverage containers were littered or put in landfills daily as a consequence of the closures. This number will now grow immeasurably.
Recycling isn’t the only industry where California’s good intentions on minimum wage have hurt the state’s image. Iconic businesses with storied histories in the state, such as Broguiere’s Dairy in Montbello and Pann’s Diner in Los Angeles, have slashed hours or faced closure in response to rapidly rising labor costs. In Emeryville, a new minimum wage decimated its “Little City Emeryville” coalition of independent businesses — most of which closed, moved locations or sold their business, according to reporting in the E’Ville Eye.
Even working parents are hurting: The Los Angeles Times reported some families dependent on subsidized childcare have come to regret the increase in their pay, which has caused them to lose more in state assistance than they gained in their paychecks.
Some initial backers of $15 have wised-up to these realities. Bill Phelps, founder of the California-based franchise Wetzel’s Pretzels, was initially a proponent of the state’s new minimum-wage policy — even penning an op-ed for Forbes claiming it was “good for business.” Flash forward several years: Phelps now says the upcoming increases in the state’s minimum wage will “result in less jobs, less restaurants, and less service,” and he warns they’ll be “bad for employees.” Phelps’ biggest concern is that, by the time legislators acknowledge these consequences, it will be too late to fix them.
California’s Legislature is notoriously slow to acknowledge harm from its feel-good policies. (Case in point: I serve on the board of a trade association forced to sue California over a law called the Private Attorneys General Act, because legislators have lacked the political will to fix its transparent flaws.) If hundreds of business closures and thousands of lost jobs aren’t enough to convince Sacramento to fix $15, perhaps severe harm to the state’s “green” reputation is the wake-up call legislators need.
The state’s entry-level employees — not to mention the environment — are counting on it.