Does Raising the Minimum Wage Help the Homeless?

As part of its biennial Point-In-Time count of its homeless residents, the city of San Francisco asks roughly one eighth of its homeless population what factors were the primary cause of their homelessness. The city’s 2019 report provides their responses to that question from its point in time counts from 2015, 2017, and 2019, which we’ve visualized in the following chart.

From January 2015 through January 2019, the loss of a job represents the top response, with approximately a quarter of all surveyed homeless residents indicating that single response [1].

During these years, San Francisco’s unemployment rate has fallen from 4.1% in January 2015 to 3.4% in January 2017 to 2.6% in January 2019. By itself, the city’s falling unemployment rate suggests that job loss should be declining as the primary cause of homelessness because employers would be increasingly reluctant to either fire or lay off employees in such a tightening job market. Logically, since job loss is the number one cause of homelessness identified by San Francisco’s homeless residents for their condition, the number of homeless in the city should also be falling.

But it’s not. Instead of falling with the city’s declining rate of unemployment, homelessness in San Francisco has been rising. San Francisco’s 2019 Point In Time homeless count report indicates that homelessness in the city rose from 6,775 in January 2015 to 6,858 in January 2017 to 8,011 in January 2019.

It would be helpful to find out more about what kinds of jobs San Francisco’s homeless residents held before they lost them, leading to their becoming homeless. Unfortunately, the survey doesn’t provide that specific kind of insight, but it does provide information about the incomes earned by the portion of the city’s homeless residents who are employed, who account for about 12% of the surveyed homeless population.

Assuming the jobs of the working homeless provide similar levels of income as the jobs that many homeless San Franciscans held before they lost them and became homeless, this data may tell us about their earning potential. In the following chart, we’ve constructed the cumulative distribution of income for San Francisco’s employed homeless residents, where we find that roughly 85% earn far below the annual income that might be earned by working full time at the city’s statutory minimum wage.

The city has been steadily increasing its statutory minimum wage rates, which in January 2015 stood at $11.05 per hour. In January 2017, the city’s minimum wage was $13.00 per hour, and in January 2019, was $15.00 per hour [2].

With a falling unemployment rate and a rising minimum wage, we should see the cumulative distribution of income earned by working homeless San Franciscans shift to the right in each year. But we only see that from 2015 to 2017 in the chart above, and only for equivalent annual incomes between $1,200 and $18,000, where we find no meaningful shift for incomes above that level, nor do we see any significant change over all incomes from 2017 to 2019.

Since San Francisco imposes a statutory minimum wage, we can estimate how many hours the city’s employed homeless are working at their jobs. The following chart maintains the cumulative distribution of income on the vertical axis, replacing the annual incomes in the horizontal axis with the equivalent hours worked at the city’s mandated minimum wage.

This chart is a little more telling. Even at minimum wage, we find that over 85% of the city’s employed homeless work less than full time year round, which we define as 40 hours per week, 52 weeks per year, or 2,080 hours per year. Only working part time at minimum wages would severely limit their ability to earn incomes sufficient to avoid being homeless [3].

Below the median 50% mark, we find that hours worked increased for this portion of the working homeless from 2015 to 2017, as unemployment fell and minimum wages rose. But from 2017 to 2019, as unemployment continued to fall and the minimum wage continued to rise, their hours worked fell back to 2015′s levels.

Above the median 50% mark, we see hours worked decline from year to year, even though the city’s unemployment rate falls and as the city’s minimum wage rises. Combined with the income distribution data, this pattern suggests that the rising minimum wage either enables the homeless persons to choose to work less while earning similar levels of income or that their employers are unable to provide as many hours for them to work at the higher minimum wage, limiting any benefit they might obtain from an increased minimum wage.

It would be really interesting to analyze a more detailed breakdown of the earned income data for San Francisco’s homeless as well as more information about their employers and employment.

Notes

[1] The survey allows for multiple responses to be recorded for the question. The report lists only the top responses given by the surveyed population.

[2] San Francisco’s biennial point-in-time counts of its homeless population took place during January 2015, January 2017, and January 2019. The indicated minimum wages are those that applied in these months.

[3] Among the surveyed population, only 1-2 individuals per year who were counted as homeless earned annual incomes that would place them above the threshold that coincides with working full time, year round at the city’s statutory minimum wage rates. That’s makes for quite a lot of income inequality among San Francisco’s homeless!