A Survey on the Economic Effects of Los Angeles County’s Plastic Bag Ban
Thursday, August 16, 2012
by Pamela Villarreal and Baruch Feigenbaum
Table of Contents
Economic Effects of the Los Angeles County Bag Ban
In 2011, the Los Angeles County Board of Supervisors passed an ordinance outlawing retailers’ use of thin-film polyethylene bags to pack consumers’ purchases. The bag ban was implemented in unincorporated areas (outside of city limits) of Los Angeles County in two stages. At first, the bag ban applied to large stores — with gross annual sales of at least $2 million or with 10,000 square feet of retail space — effective July 1, 2011. The second stage of the ban included stores with gross annual sales of less than $2 million or less than 10,000 square feet of retail space and became effective January 1, 2012. These stores included small grocery stores, drug stores and convenience stores.
County leaders assumed that the ordinance would eliminate the use of plastic bags and leave consumers with two choices: 1) shoppers could bring a personal reusable bag or other container to carry their goods, or 2) consumers could pay for a paper bag, with the fee acting as a penalty or deterrent to this option. When the county conducted its Environmental Impact Report (EIR) in 2009 it stated:
Should the proposed ordinances be adopted, it is anticipated that there would be a transition period during which consumers would switch to reusable bags. The County anticipates that a measurable percentage of affected consumers would subsequently use reusable bags (this percentage includes consumers currently using reusable bags) once the proposed ordinances take effect. The County further anticipates that some of the remaining consumers, those who choose to forgo reusable bags, may substitute plastic carryout bags with paper carryout bags.2
These were the only two choices county leaders considered. They failed to consider a third option: that consumers would shop at stores unaffected by the ban — that is, stores in the incorporated areas of Los Angeles County. They did not consider the possibility that commerce would migrate, or be displaced, due to the law. In order to determine the effectiveness and consequences of the Los Angeles County plastic bag ban, the NCPA conducted a survey of 80 large stores (supermarkets and variety stores) affected by the ban beginning in July 2011. Additionally, each large store in unincorporated Los Angeles County was matched with one or two other stores within two miles and also in an incorporated area. The stores were matched in order to compare the effect of any displacement of commerce due to the ban.
The NCPA also contacted another list of 700 smaller stores in unincorporated areas that were affected by the ban beginning January 1, 2012. Through letters, phone calls, emails and follow-up personal visits, NCPA staff sought responses to the survey from store managers. The response rate was 3 percent. [See Appendix I for the telephone script used.] [For a list of the questions asked, see Appendix II.]
Impact on Sales. Following the ban, sales increased at stores in incorporated cities compared with stores in unincorporated areas. Of the respondents to the survey:
- Over a one-year period (pre- and post-bag ban), 60 percent of stores in incorporated areas reported an increase in sales averaging 9 percent.
- Fourth-fifths of the stores in the unincorporated areas reported a decrease in sales averaging –5.7 percent.
Examining the overall change in sales of all the stores that responded among the two groups (incorporated versus unincorporated), Figure I shows:
- Incorporated stores experienced an increase in sales of 3.4 percent.
- However, unincorporated stores reported a decline in sales of –3.3 percent.
Though a variety of factors influence sales, the survey results are consistent with a shift in consumer purchases from stores in unincorporated areas affected by the ban to stores in incorporated areas that were not affected by the ban.
Impact on Retail Employment. The Los Angeles County bag ban is effective only outside of incorporated cities. Howevefr, 67 percent of the land in Los Angeles County is in unincorporated areas, and 10 percent of the county’s population (one million people) lives there.3
Compared to the four-to-five-month period before the ban took effect, none of the stores in incorporated areas of Los Angeles County reported employment losses following the ban. However, stores in the unincorporated areas reported job losses they attributed to displaced commerce: customers patronizing other stores that still offered plastic bags. In the initial period (July 2011 to January 2012) this included smaller stores in the unincorporated areas as well as comparable, competing supermarkets and drugstores in incorporated areas.
As shown in Figures II and III:
- Forty-three percent of the stores surveyed were in incorporated areas, and they reported employing more people in the four to five months following the ban than before the ban.
- Overall employment increased 2.4 percent at stores in incorporated areas.
However, stores in the unincorporated areas all reported that the number of individuals they employed dropped after the bag ban — by an average of 10.4 percent.4
Though some of these reported job losses could be the result of the economy, it is highly unlikely that employment would fall only among those stores in unincorporated areas. The unemployment rate in Los Angeles has been falling since July 2010, before the ban took effect. In July 2010, the unemployment rate in Los Angeles County was 13.4 percent; by May 2012, it had fallen to 11.1 percent.5
Retail jobs would not be the only employment affected if bag bans became widespread. Though outside the scope of this study, it is worth noting that most thin-film plastic bags are made in the United States, and the plastics manufacturing industry employs more than 30,000 people directly and many more indirectly.6 By contrast, most reusable bags are imported. According to the U.S. International Trade Commission, approximately 573 million reusable bags were imported into the United States in 2011.7 If plastic bag bans spread, more imported reusable bags will replace domestically-produced plastic bags. Thus a ban has a negative impact on jobs.
Impact on Bag Purchases. As expected, in the months following implementation of the Los Angeles County ban, stores in unincorporated areas reduced their plastic bag purchases. After the ban became effective:
- All of the stores in unincorporated areas responding to the survey reported reduced plastic bag purchases — declining by an average of 51 percent during the first month after the ban took place.
- Three-fourths of the large stores reported reducing plastic bag purchases, and purchases fell an average of 17.4 percent.
- Half of the small stores in unincorporated areas stopped purchasing plastic bags after the ban — an average decrease of approximately 86.5 percent.
- By the fourth month after the ban, all unincorporated stores reduced their plastic bag purchases 91 percent.
Over the same period, the stores in incorporated areas reported little to no change in plastic bag purchases.
Reusable Bags. In Los Angeles County, stores affected by the plastic bag ban had the option of giving away or selling reusable bags, in addition to offering paper bags for a 10-cent fee. The stores surveyed reported:
- Prior to the ban stores reported purchasing an average of 171 reusable bags per month.
- After the ban stores bought 2,275 bags per month, an increase of 1,232 percent.
- In total, 64 percent of stores increased their purchases, 29 percent decreased their purchases and 7 percent reported no change.
- While 43 percent of stores reported that they did not purchase reusable bags before the ban, every store purchased these bags after the ban.
Many of the stores reported losing money on reusable bags. One-third of stores gave the bags away and two-thirds sold reusable bags. Approximately 48 percent of stores reported losing money on reusable bags, while 52 percent did not lose money on such bags. The stores that lost money reported an average loss of more than $600 per month. The stores were asked about their expectations for future losses:
- Nearly 38 percent of stores expected the losses to stop after 1 to 3 months, 12.5 percent between 4 to 6 months, and another 12.5 percent between 6 months and 1 year.
- Another 38 percent expected the losses to last indefinitely (more than 1 year).
- In order to avoid losing money, almost 29 percent of stores said they would stop providing free reusable bags, and almost 36 percent said they would raise prices on these bags.
While stores lost money due to the plastic bag ban, customers lost both money and their freedom of choice (which reduces consumer welfare). Many customers prefer plastic bags to paper or reusable bags. As a result, it is likely that some consumers in unincorporated areas instead patronize stores in incorporated areas that offer plastic bags.
Alternatives to Reusable Bags. Without plastic bags, some customers decided to use alternative means to transport their groceries.
Shopping Carts and Hand Baskets. Almost 20 percent of stores noted increases in the loss of shopping carts or hard shopping baskets. These losses totaled $500 to $3,000 per month, with an average loss of $1,500. In an industry that relies on profit margins of less than 2 percent, $3,000 a month is a significant loss.
Produce Bags. Since customers could no longer use plastic bags to transport their groceries, some chose to put more of their grocery items in bags that were not banned — clear plastic produce bags. This explains why stores reported ordering nearly 31 percent more plastic produce bags after plastic grocery bags were banned.
Paper Bags. Though Los Angeles County banned plastic bags, it allowed the stores to offer consumers paper bags, but required them to charge customers 10 cents per bag. However, because stores could not predict with certainty how customers would react, they changed their purchasing strategies in different ways. But almost all experienced some kind of monetary loss:
- Some stores decreased purchases of paper bags by one-third while others increased paper bag purchases by 1,625 percent.
- Though more than half (56 percent) of stores increased their paper bag purchases, those that purchased more bags purchased significantly more while those that purchased less purchased only a few less.
Paper bags are not functionally equivalent to plastic bags. Though a standard paper bag can hold a greater volume of products than a single plastic bag, they are less flexible, lack handles and do not have the same potential for reuse as plastic bags. Furthermore, given a choice, some consumers may prefer plastic bags over paper or the inconvenience and expense of carrying reusable bags.