Thirty percent of all homeless people in the United States live in California, despite the state representing just under 12 percent of the nation’s population. The state’s previous policies aimed at combating homelessness—like affordable housing initiatives—have been largely unsuccessful. Many people blame California’s liberal social services for attracting new residents who refuse to work or find housing. However, chronic homelessness across the state is not the result of people gaming the system; it is caused by state officials failing to address the root of the issue. The high cost of living in California is likely the culprit, as 90 percent of California’s homeless adults lost housing while residing in the state. As such, to alleviate homelessness California must raise its statewide minimum wage—an undertaking that is not as straightforward as it might seem.
To be sure, California’s rising rate of homelessness has not been overlooked by policymakers. Over the years, the state has attempted various methods to address the issue, often turning to affordable housing initiatives. In addition to the $17.5 billion already put toward reducing homelessness, California has allocated $4 billion of extra funding through 2024 to Project Homekey, which converts commercial buildings and other existing structures into affordable housing. The Project has also built 13,500 affordable units. Still, Homekey is slow-moving and has run into a number of issues, including community opposition to new construction.
The issue, moreover, is not as cut and dry as generating affordable housing, as such a solution is reactive rather than proactive. Reducing economic precarity in the first place is crucial to solving the issue, because once a person loses their home, bad credit, stigma, and other factors make it difficult to regain housing. In a survey of the state’s homeless population, participants noted that the amount of money they would have needed to retain their housing was relatively low. Increasing the minimum wage could therefore be a viable means of preventing people from having to leave their homes altogether.
The need for more proactive measures could indicate that policymakers should shift their attention to facilitating the creation of new jobs. While this might be helpful, contrary to popular belief, homelessness in California is not entirely the result of unemployment in most cases. A study conducted in Los Angeles County revealed that 19 percent of homeless individuals were employed immediately before losing their housing. Such statistics point to the fact that, although California’s current minimum wage might make housing accessible temporarily, it often does not allow Californians to save enough money to retain that housing should they face a lapse in employment. Any emergency or illness that prevents work for a couple of days could be the difference between having and losing housing. Another study revealed how abrupt the shift to homelessness often is. Study participants, who made an average wage of $960 a month, had little notice, on average just 10 days, before losing their housing.
Some argue that raising the minimum wage would harm businesses by raising their operating costs—potentially pushing them to reduce staff, which would undercut any benefits brought by higher wages since fewer people would have access to them. However, a recent study at the University of California, Berkeley proves that this assumption is false. Higher costs due to increased salaries can be supplemented by small price increases that customers will still pay.
In fact, employers stand to gain from decreased rates of homelessness. Higher wages incentivize workers to retain their jobs for longer, a boon to employers: Decreased labor turnover helps businesses spend less on training and job advertising. Moreover, some Californian small business owners suggest that high rates of homelessness drive away potential customers, harming their bottom lines.
Lawmakers have made some strides toward increasing the minimum wage, but those efforts have been piecemeal. On January 1, 2024, the minimum wage in California was raised to $16 per hour for all workplaces across the state, as stipulated by a 2016 law that set annual incremental increases for the minimum wage. Despite appearing like a promising development, the change is largely symbolic. These incremental increases fail to keep up with annual inflation rates, which are rising at an average of 2.44 percent a year. In 2024, to have the same purchasing power that $16 provided in 2016, someone would need to make $20.75. Further, in 2023, California was the second most expensive state to live in, rendering small pay bumps even more ineffective.
In response, 40 out of California’s 58 counties already require wages that surpass the new minimum, and two new bills have raised wages for fast food and healthcare workers to $20 and between $18 and $23, respectively. Still, if people looking for work cannot find housing in those areas, they cannot take advantage of the higher wages without commuting from far away, which can be exorbitantly expensive.
Minimum wage increases are also stymied by nefarious business practices. Despite evidence that higher wages benefit employers, efforts to implement them have been met with resistance across the country. For example, in response to being forced to pay New York City delivery drivers $18 an hour, Uber made it more difficult for customers to tip drivers.
Even the California state government has attempted to sideline its own rules. Governor Gavin Newsom allegedly ensured that one of his wealthy donors—an owner of 24 Panera Bread restaurants—was able to skirt wage regulations: A clause in the aforementioned law entitling fast food workers to $20 an hour exempts establishments that bake their own bread, allowing them to continue paying $16 an hour. While it is still unclear how this exemption made its way into the legislation (even the bill’s author, Democratic Assemblymember Chris Holden, claims not to know), this example underscores the necessity for uniform and enforced adherence to minimum wage standards. For minimum wage hikes to be successful in mitigating poverty and homelessness, employers must not attempt to undercut them through shady business strategies.
California cannot afford to delay action that improves the lives of those closest to the poverty line. A minimum wage increase that stays one step ahead of inflation and heightened living costs is the first step in addressing the causes of homelessness rather than treating its aftermath. An increased minimum wage would address the gaps left by slow-moving affordable housing programs, as it will help prevent housing instability in the first place. While the state may still need to pass policies that increase employment so that all those who need work have opportunities, the first step is ensuring that such positions provide paychecks that people can live off of.