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ENGINEERING LIBRARY 
 UNIVERSITY OF ILLINOIS 
 
 URBANA, ILLINOIS 
 
 enter for Advanced Computation 
 
 UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN 
 
 URBANA. ILLINOIS 61801 
 
 CAC Document No. 73 
 
 TWO PAPERS ON THE EFFECTS OF MANDATORY 
 DEPOSITS ON BEVERAGE CONTAINERS 
 
 By 
 Hugh Folk 
 
 November 1972 
 January 1973 
 
CAC Document No. 73 
 
 
 TWO PAPERS ON THE EFFECTS OF MANDATORY 
 DEPOSITS ON BEVERAGE CONTAINERS . 
 
 By 
 
 Hugh Folk 
 
 Center for Advanced Computation 
 University of Illinois at Urb ana- Champaign 
 Urbana, Illinois 61801 
 
 November 1972 
 January 1973 
 
 This work was supported in part by the Illinois Institute for Environ- 
 mental Quality and in part by the Minnesota Pollution Control Agency. 
 
TABLE OF CONTENTS 
 
 PAPER NO. 1: Employment Effects of the Mandatory Deposit Regulation 
 
 ABSTRACT 
 
 I. Expenditure Flows and Employment 2 
 
 II. Application of Expenditure Analysis to this Problem 2 
 
 III. Containers for Beverages in the United States and Illinois .... 3 
 
 IV. Economic Consequences of the Deposit Regulation 8 
 
 V. Employment Effects of the Deposit Regulation 16 
 
 VI. Summary and Conclusions 2k 
 
 REFERENCES 26 
 
 PAPER NO. 2: Employment Effects of a Ban on Nonreturnable Beverage 
 Containers in Minnesota 
 
 ABSTRACT 
 
 I. Expenditure Flows and Employment 28 
 
 II. Effect of a Ban on Beverage Sales 30 
 
 III. Effect of a Ban on Prices 33 
 
 IV. Consumer Savings 39 
 
 V. Employment Effects k^ 
 
 VI. Summary and Conclusions 56 
 
 REFERENCES 58 
 
 APPENDIX A 59 
 
 APPENDIX B 62 
 
LIST OF TABLES 
 
 1. Estimated Sales of Beer and Soft Drinks, by Container Type, 
 United States, 1958-1970 (Billions of Containers) k 
 
 2. Price per Container and Price per Ounce, Beer and Soft Drinks, 
 Illinois, Summer 1971 6 
 
 3. Estimated Sales of Beer and Soft Drinks, by Container Type, 
 Illinois, 1962-1970 (Billions of Containers) 9 
 
 k. Estimated Sales of Beverages at Super Market Prices, 
 
 Illinois, 1970 13 
 
 5. Beverage Sales and Container Costs for a Complete Shift to 
 Returnable s 11+ 
 
 6. Value of Shipments and Value Added by Manufacture in Selected 
 Industries Related to Beer and Soft Drink Manufacture and Sale, 
 United States and Illinois, I968-I969 (Millions of Dollars) . . 18 
 
 7. Estimated Employment in Selected Industries Related to Beer 
 
 and Soft Drink Manufacture and Sale, United States and Illinois, 
 1968-1970 (Thousands of Workers) 19 
 
 8. Total Requirements Coefficients, Shipments, Employment, Ratio 
 of Employment to Shipments, Employment per Million Dollars of 
 Metal Cans Delivered to Final Demand and Estimated Reduction 
 in Employment Resulting from a Complete Shift to Returnables 
 Illinois, Selected Industries 21 
 
 9- Total Requirements Coefficients, Shipments, Employment, Ratio 
 of Employment to Shipments, Employment per Million Dollars of 
 Glass Containers Delivered to Final Demand and Estimated 
 Reduction in Employment Resulting from a Complete Shift to 
 Returnables, Illinois, Selected Industries 22 
 
 10. Soft Drink Volume., Price per Ounce, and Sales for Home Market 
 and Total Case Sales, Estimated Consumer Savings from a Ban on 
 One-Way Containers, Minnesota, 1972 estimated, and Postban . . k2 
 
 11. Estimated Sales of Beer by Volume in Minnesota, 1972 hk 
 
 12. Estimated Beer Sales, 1972 and Post Ban, by Container Type . . U6 
 
 13. Cases Distributed Per Man-Year of Employment Soft Drink 
 Bottlers, Brewers and Beer Distributers 50 
 
 Ik. Estimated Direct and Indirect Employment Effects of Reduction 
 
 in Can and Bottle Purchases as a Result of the Ban, Minnesota . ^k 
 
Paper No. 1 
 
 EMPLOYMENT EFFECTS OF THE MANDATORY DEPOSIT REGULATION 
 
ABSTRACT 
 
 The regulation requiring a five cent deposit on all 
 beverage containers proposed by the Solid Waste Management 
 Task Force of the Illinois Institute for Environmental Qual- 
 ity for adoption by the Illinois Pollution Control .Board can 
 be expected to have significant employment effects." This 
 report attempts to identify and measure these employment 
 effects using straight-forward economic impact analysis, which 
 in this instance is complicated by the desirability of iden- 
 tifying and measuring those effects that occur within the 
 State of Illinois. 
 
 The first section of the paper briefly describes the 
 general pattern of expenditure flows and the effects of 
 changes in flows on employment. The second section specifies 
 particular features of this conceptual model to the problem 
 investigated and points out the data problems which impede 
 the analysis. The third section describes the trend to non- 
 returnable containers and discusses some of the industrial 
 impacts and problems involved in this shift. The fourth sec- 
 tion examines the economic consequences of the deposit regu- 
 lation. The fifth section estimates the employment effects 
 of the regulation. The sixth section is a summary of findings 
 and examines some of the Implications of alternative ways of 
 imposing the regulation. 
 
I. Expenditure Flows and Employment 
 
 The analysis is based on the changes in employment that result from 
 changes in the flow of expenditure. The underlying principles are quite 
 simple. 
 
 (1) a rise in price of a commodity leads to a decrease 
 in consumer purchases of that commodity; 
 
 (2) a decrease in sales of the product leads to a re- 
 duction in retailer orders from suppliers; 
 
 (3) a reduction of orders for a supplier leads to a 
 reduction in his orders from manufacturers; 
 
 (4) a reduction in orders for a manufacturer leads to 
 curtailment of production and a reduction in pur- 
 chases of materials and supplies and a reduction in 
 manufacturer's employment; 
 
 (5) the reduction in purchases of materials and supplies 
 has the same employment effects as sequence 
 on suppliers of materials to the manufacturer; 
 
 (6) the reduction in employment leads to a reduction in 
 earnings, and, therefore, in all consumer spending. 
 
 A reduction in consumer spending on one product is generally offset 
 by an increase in spending on other products since consumer spending is 
 generally a large and fairly stable percentage of consumer income. 
 
 Thus the diversion of consumer spending from one product to others 
 generates a sequence of direct effects and indirect effects which spread 
 through the economy and eventually affect industries which make no obvious 
 direct contribution to the production of the industry initially affected. 
 Both direct and indirect effects of a reduction in commodity spending are 
 generally completely offset by the corresponding increases resulting from 
 the increased spending on other products. 
 
 Things can go wrong. A decrease in spending on domestic products 
 offset by increased spending on imported products can lead to spending and 
 employment "leakages" which result in lower total spending, wages, and em- 
 ployment. The levels of employment before and after a change in spending 
 can be changed too, even though the aggregate amount of wages remains un- 
 changed. A recent study of the impact of disarmament in the United States 
 found that a full-employment shift from heavy concentration on defense to 
 more civilian emphasis would lead to an increase in employment levels [8]. 
 
 II. Application of Expenditure Analysis to this Problem 
 
 Retailers will be required to collect a $.05 deposit for each container 
 sold for off-premise consumption. The regulation may change the mix of 
 
packages in which beverages are sold, but how great the shift will be is 
 impossible to determine with any high degree of confidence. The effect of 
 the regulation on total sales is not known. The numbers of beverages and 
 containers presently sold and their distribution among taverns, restaurants, 
 vending machines, and other retail outlets is not known either. Where the 
 containers in which the beverages sold in Illinois are manufactured is not 
 known, nor is it known where Illinois manufactured containers are sold. 
 
 Available is some limited information on employment, shipments, value 
 added by manufacture, and related industry statistics from the 1967 Census 
 of Manufacturers, recent industry employment figures from County Business 
 Patterns, some information on beer consumption, based on tax records, and 
 some estimates of national soft drink and beer sales and packaging by con- 
 tainer type. 
 
 Thus the knowledge needed for a complete and persuasive impact analysis 
 is lacking, as it nearly always is in any particular application. To make 
 any progress toward a rational judgment on the employment impacts, a number 
 of assumptions. must be made, any one of which may be questioned. As pointed 
 out in the preceding section, however, there is reason to be confident that 
 a diversion of spending from one form of container to another will result in 
 changes in spending on other commodities which will tend to offset any favor- 
 able total spending and wage effects. 
 
 III. Containers for Beverages in the United States 
 
 and Illinois 
 
 Containers for beverages make up about one-half of all food and beverage 
 containers sold in the United States. In 1970, an estimated 47.4 billion 
 fillings of soft drinks and 35.6 billion containers of beer and related malt 
 liquors were sold in the United States [Table 1]. The number and the propor- 
 tion of beverage containers in the total would have been much larger except 
 for the important role that returnable containers still play. In terms of 
 fillings, beverages were packaged as follows in 1970: 
 
 Percentage of Fillings 
 Soft drinks Beer 
 
 Bottles, total 72.4 47.2 
 
 non-returnable (17.5) (20.2) 
 
 returnable (54.9) (27.0) 
 
 Cans 27.6 52.8 
 
 Total 100.0 100.0 
 
 Tb e trend to non-returnables . Sales of nonreturnable bottles and cans 
 have increased rapidly in the past decade, while use of returnable bottles 
 has declined. There are several reasons for the persistence of returnables. 
 First, the unit prices of soft drinks are in the $.10 to $.15 range, and 
 the cost of a non-returnable container is close to $.05 and therefore a very 
 
TABLE 1 
 
 Estimated Sales of Beer and Soft Drinks, by Container Type, United States, 1958-1970 
 
 ( billions of containers ) 
 
 
 
 Soft 
 
 drinks 
 
 
 
 
 Total 
 
 Bottles ta] 
 
 
 
 Year 
 
 Total 
 
 Non-re- 
 turnable 
 
 Return- 
 able 
 
 Cans [b] 
 
 1970 
 
 47.4 
 
 34.3 
 
 8.3 
 
 26.0 
 
 13.1 
 
 1969 
 
 47.9 
 
 36.1 
 
 6.4 
 
 29.8 
 
 11.8 
 
 1968 
 
 41.1 
 
 31.0 
 
 4.6 
 
 26.4 
 
 10.0 
 
 1967 
 
 39.9 
 
 32.7 
 
 3.6 
 
 29.1 
 
 7.2 
 
 1966 
 
 37.6 
 
 32.0 
 
 2.0 
 
 30.0 
 
 5.6 
 
 1965 
 
 37.0 
 
 33.2 
 
 1.0 
 
 32.1 
 
 3.8 
 
 1964 
 
 34.4 
 
 31.6 
 
 .6 
 
 31.0 
 
 2.8 
 
 1963 
 
 32.3 
 
 30.2 
 
 .6 
 
 29.6 
 
 2.1 
 
 1962 
 
 31.2 
 
 29.6 
 
 .5 
 
 29.1 
 
 1.7 
 
 1961 
 
 30.8 
 
 29.5 
 
 .4 
 
 29.1 
 
 1.2 
 
 1960 
 
 29.3 
 
 28.5 
 
 .2 
 
 28.2 
 
 .8 
 
 1959 
 
 32.2 
 
 31.7 
 
 .2 
 
 31.5 
 
 .5 
 
 1958 
 
 30.3 
 
 29.8 
 
 .2 
 
 29.7 
 
 .4 
 
 Beer 
 
 a] 
 
 
 
 Bottles [a ^ 
 
 
 
 
 
 Non-re- 
 
 Return- 
 
 
 Total 
 
 Total 
 
 turnable 
 
 able 
 
 Cans' 
 
 35.6 
 
 16.8 
 
 7.2 
 
 9.6 
 
 18.8 
 
 34.9 
 
 18.2 
 
 6.9 
 
 11.3 
 
 16.7 
 
 32.2 
 
 16.9 
 
 6.0 
 
 10.9 
 
 15.3 
 
 30.8 
 
 17.0 
 
 5.8 
 
 11.2 
 
 13.8 
 
 27.6 
 
 14.7 
 
 5.0 
 
 9.7 
 
 12.9 
 
 26.2 
 
 14.8 
 
 4.7 
 
 10.1 
 
 11.4 
 
 25.8 
 
 14.9 
 
 4.4 
 
 10.5 
 
 10.9 
 
 24.6 
 
 15.3 
 
 3.9 
 
 11.4 
 
 9.3 
 
 24.0 
 
 15.0 
 
 3.4 
 
 11.4 
 
 9.1 
 
 23.2 
 
 14.4 
 
 2.8 
 
 11.6 
 
 8.8 
 
 22.5 
 
 13.6 
 
 1.9 
 
 11.7 
 
 8.9 
 
 23.1 
 
 14.8 
 
 1.4 
 
 13.4 
 
 9.2 
 
 22.7 
 
 14.3 
 
 1.2 
 
 13.1 
 
 8.3 
 
 a. based on the number of crowns 
 
 b. Estimated at 500 cans per base box of metal after 1966. 
 
 Source: 1958 to 1965, Midwest Research Institute, The Role of Packaging in Solid Waste Management , Bureau of Solid 
 Waste Management, Environmental Protection Agency, Washington, D. C. Table 26, p. 44., 1969. 
 
 1966 to 1970, estimated from U. S. Department of Commerce, Bureau of the Census, Current Industrial Reports , 
 Series M-32G and M-34D, Washington, D. C, 1966-1970, and from Bureau of Census data compiled 
 in Glass Container Manufacturers Institute, Glass Containers, 1971 , New York, 1971. 
 
considerable part of the total revenue from the product. The consumer who 
 is willing to gather up, store, and return his containers is usually better 
 off in buying the returnable container. If, however, he does not wish to 
 return containers he is usually better off in buying the non-returnable on 
 which he presently does not have to pay a deposit. Second, the soft-drink 
 market is largely local. Because soft-drink franchises are geographically 
 restricted it is relatively easy for the bottler to manage a returnable 
 system. Since returnables cost about twice as much as non-returnables , any 
 trippage over five or six is likely to provide the bottler with an economic 
 saving which will permit him to sell returnables cheaper than non-returnables. 
 Third, returnables are the traditional way of doing business in the soft 
 drink industry and bottlers have plants and trucks adapted to the system. 
 Fourth, the soft-drink industry is competitive. As long as one bottler per- 
 sists in supplying returnables at low cost, the other major brand bottlers 
 dare not abandon this cheaper alternative. Consumers have strong prefer- 
 ences for brands, certainly, but these are not so strong as to allow a bot- 
 tler to preserve his market share at a premium price. Consumers have con- 
 tainer preferences as well, and most bottlers provide a variety of packages. 
 
 The returnable system for beer bottles has declined for several reasons. 
 First, beer prices are considerably higher than soft drink prices, so that 
 container cost is relatively less important. Moreover, the differential 
 between returnable and non-returnable beer packages of the same size is smaller 
 than the differential for soft drinks [Table 2]. This difference results from 
 the national markets of many of the major brewers for whom the returnable 
 system must be much more expensive than for the locally based soft-drink bot- 
 tler. Price competition in the beer industry is apparently less effective 
 than in the soft-drink industry (brand preferences are stronger) , so that 
 "premium beers" sell for considerably more than "regular beers." 
 
 The rapid growth in the use of non-returnable containers both for beer 
 and soft drinks is the result of consumer preference, or at least tolerance, 
 for non-returnables. The average consumer uses about 400 units of beverages a 
 year. At a unit cost of $.04, this represents an additional annual expenditure 
 of about $16 for the consumer who uses non-returnables exclusively over what 
 he would pay had he used returnables exclusively. Of course, most consumers 
 use some returnables (in vending machines or taverns) , and most use some non- 
 returnables (in restaurants or airlines.) For the consumer buying for home 
 use where the choice of containers is discretionary, the use of non-returnables 
 might add $8 or $10 in additional cost, a significant amount for many consumers, 
 
 The non-returnable container may be particularly convenient in certain 
 instances. The consumer who shops while walking from work or transportation, 
 or who buys for traveling or picnics, or who lives where there are no facili- 
 ties for cooling or keeping drinks may value the convenience highly. Central 
 city residents apparently have been prime users of non-returnables, for trip- 
 page tends to be low in both Chicago and New York, and non-returnables sell 
 very heavily. Suburban residents, however, often suffer little additional 
 inconvenience from returnables, since driving to shop is common. Trippage is 
 correspondingly somewhat higher in the suburbs. This pattern of trippage and 
 use of non-returnables suggests that it is not the price of the container sys- 
 tem reflected in beverage costs that is the critical determinant of the choice 
 of containers. Over time, of course, affluence has increased, and this has 
 
TABLE 2 
 
 Price per Container and Price per Ounce, Beer and Soft 
 Drinks, Illinois, Summer 1971 
 
 Size in ounces 
 
 Returnable bottles 
 
 32 
 
 16 
 
 12 
 
 Non-returnable bottles 
 
 32 28 
 
 Retail price per pa* 
 
 :kage 
 
 
 
 
 
 
 
 Premium beer 
 
 
 47.6 
 
 
 
 21.4 
 
 
 54.9 
 
 Regular beer 
 
 
 40.8 
 
 
 
 18.7 
 
 
 46.1 
 
 Average 
 
 
 44.2 
 
 
 
 20.0 
 
 
 50.5 
 
 Soft drinks 
 
 
 29.6 
 
 12, 
 
 .8 
 
 13.2 
 
 15.5 
 
 34.7 
 
 16 
 
 34.7 33.7 16.5 
 
 12 
 
 10 
 
 Cans 
 
 16 12 
 
 22.2 
 
 
 27.8 
 
 22.9 
 
 19.6 
 
 
 24.9 
 
 20.3 
 
 20.9 
 
 
 26.4 
 
 21.6 
 
 
 14.6 
 
 
 15.9 
 
 Price per ounce 
 
 Premium beer 
 
 Regular beer 
 
 Soft drinks 
 
 1.48 1.77 
 1.27 1.55 
 .925 .800 1.10 1.65 
 
 1.71 1.85 
 
 1.44 1.63 
 
 1.09 1.20 1.09 1.45 
 
 1.74 1.90 
 
 1.55 1.69 
 
 1.32 
 
 Source: Derived from Beverage Containers, Recommendations of the Illinois Solid Waste Management Task 
 Force , Illinois Institute for Environmental Quality, IIEQ Document No. TF-1, Springfield and 
 Chicago, 1971. 
 
permitted consumers to pay less attention to the costs of containers, but 
 at any one time it appears that those who are least able to pay are the 
 least likely to save the few cents that can be gained from choosing return- 
 ables and returning the bottles. 
 
 The shift to non-re turnables has also been impelled by availability. 
 Because non-returnable soft drinks were not commonly available until the 
 past few years, they made little impact. Today, however, a particular brand 
 or size desired may not be available in returnable bottles in many stores. 
 In communities such as New York in which the shift to non-re turnables has 
 been extensive, the question of consumers' preferences for non-returnables 
 is moot, since they are not available as a reasonable alternative. Inade- 
 quate facilities for redeeming returnables also makes them effectively un- 
 available for many consumers. In many instances redeeming a few bottles 
 becomes a major task. Rarely is it possible to carry out this transaction 
 at the checkout counter (as one can do with the "$.05-off" coupons). 
 
 Some people argue that consumers are so ignorant of prices and so con- 
 fused by the variety of brands, sizes, and container types facing them that 
 they may be buying substantial numbers of non-returnable containers under the 
 misapprehension that they represent an economical alternative. The fact that 
 in Illinois deposits were until recently commonly included in the price of 
 the package is thought to contribute to these misapprehensions. There is 
 probably some truth in these arguments. If, however, non-returnables persist, 
 after the recent adoption of the legal requirement that price and deposit 
 must be separatelely listed and after major chains post prices per ounce, then 
 it will be clear that ignorance was not an important cause of the shift to 
 non-returnables . 
 
 Whether consumers consciously chose non-returnables because they prefer- 
 red them, or they were tricked into it, the result has been the same — an in- 
 creasingly large fraction of the market has moved into non-returnables. 
 
 Critics of non-returnables argue that they are costly, a waste of scarce 
 energy, and contribute unnecessarily to solid waste problems and litter. 
 
 There are strong proponents of non-returnables as well. Much of the 
 growth in sales of the glass container industry and the metal can industry in 
 the past decade has come from these containers. These are important industries 
 in Illinois and the employment and welfare of many Illinois workers depends 
 on the continued production of these products. Many national brewers and 
 producers of house-brand soft drinks see in these containers the solution to 
 their packaging problems. Retailers are in the middle. There are obvious ad- 
 vantages in non-returnables. Currently, mark-ups are usually somewhat higher 
 for non-returnables than for returnables even though non-returnables are gen- 
 erally less trouble and expense for retailers. Returnables require more space 
 and labor in redemption and stacking. Many retailers are unhappy with the prob- 
 lems of handling both returnables and non-returnables and would prefer one 
 system or the other but not both at the same time. Those soft-drink bottlers 
 who have already made the transition to non-returnables would like to see the 
 transition completed, but many bottlers strongly prefer the returnable system 
 and are reluctant to go exclusively into the non-returnable system. Like re- 
 tailers, however, they face the problems and expense of multiple lines, inven- 
 tories, and other inconveniences of handling both systems at the same time. 
 
The principal beneficiaries of the shift to non-retufnables have been 
 the container manufacturers, canners of house-brand soft drinks, and con- 
 centrated national brewers and their employees. A return to the returnable 
 system would involve these firms in substantial competitive disadvantage, 
 layoffs, additional costs, and capital losses. For local soft-drink bottler 
 there would be additional labor costs and capital losses, but such a shift 
 would benefit them in their competition against house brands (which are ex- 
 clusively packaged in cans) and would eventually save them the capital costs 
 of multiple lines, although it might involve immediate capital losses from 
 the canning lines rendered useless. Retailers would be affected as well, 
 since the shift would probably change their profits from this important com- 
 ponent of super-market and convenience store sales. 
 
 Beverage containers in Illinois . There is little information available 
 on the use of different containers in Illinois. The distribution is prob- 
 ably similar to the national pattern. One Chicago bottler estimates that th 
 proportion is about one-half returnables for soft drinks, with national bran 
 having a somewhat larger proportion of returnables [A]. Information is also 
 scanty on the quantity of beverages sold in Illinois as well. Estimates on 
 the volume of beer consumed and Illinois' share of national consumption [9] 
 make it possible to estimate Illinois beer sales by container type on the as- 
 sumption that the distribution is the same as the national pattern. No direi 
 information was available on the sales of soft drinks in Illinois; however, 
 assuming that the proportion of all soft drinks sold in Illinois was the same 
 as the proportion of all shipments from the Illinois bottled and canned soft 
 drink industry (SIC 2086) to the total in 1967, and assuming that the dis- 
 tribution of containers in the United States it is possible to estimate the 
 number of soft drink sales by container type [Table 3]. 
 
 IV. Economic Consequences of the Deposit Regulation 
 
 The actions of bottlers and brewers, retailers, and consumers will de- 
 termine the economic consequences of the regulation. 
 
 Effect on total demand. Although no one has estimated a demand curve 
 for soft drinks or beer, some general observations can be made. First, de- 
 mand for soft drinks appears to be relatively elastic with respect to income 
 and relatively inelastic with respect to price. Or, to say the same thing, 
 sales of soft drinks have increased somewhat more rapidly than income in 
 recent years, and sales have increased despite rising prices. It therefore 
 seems unlikely that the cost effects of the mandatory deposits (which, it is 
 argued below, will be small in any event) will reduce sales noticeably. Sec- 
 ond, beer sales have not increased in Illinois at anything like the rate in 
 the United States. There has probably been some substitution of soft drinks 
 for beer in relative terms, even though sales of both have increased. Becauj 
 the cost effects, small as they are, will be greatest for beer, which has a 
 much larger proportion of its sales in non-returnables, the regulation may 
 accelerate this substitution, leading to a somewhat smaller rate of growth o 
 beer sales. Sales for 1971 will probably be somewhat higher than in 1970, 
 but there is little advantage in making guesses concerning the increase. In 
 the remainder of the report estimates of changes are based on the assumption 
 that beverage sales and related industry sales and employment remain at 1970 
 levels. 
 
TABLE 3 
 
 Estimated Sales of Beer and Soft Drinks, by Container Type, Illinois, 1962-1970 
 
 ( billions of containers ) 
 
 Soft Drinks 
 
 [a] 
 
 [b] 
 
 Bottles 
 
 Bottles 
 
 Non-re- Return- 
 Year Total Total turnable able Cans 
 
 Non-re- Return- 
 Total Total turnable able Cans 
 
 Illinois 
 % of U. S 
 
 [c] 
 
 1970 2.7 1.9 
 
 1.5 
 
 2.1 1.0 
 
 .4 
 
 1.1 
 
 5.80 
 
 [e] 
 
 1969 2.7 2.0 
 
 .4 
 
 1.7 
 
 2.0 1.1 
 
 .7 1.0 
 
 5.87 
 
 1968 2.3 1.7 
 
 .3 
 
 1.5 .6 
 
 1.9 1.0 
 
 6.01 
 
 1967 2.2 1.8 
 
 1.6 
 
 1.9 1.1 
 
 .4 
 
 .7 .9 
 
 6.23 
 
 1966 2.1 1.8 
 
 .1 
 
 1.7 
 
 1.8 .9 
 
 .3 
 
 .6 .8 
 
 6.42 
 
 1965 2.1 1.9 
 
 .1 
 
 1.8 .2 
 
 1.7 1.0 
 
 .3 
 
 .7 
 
 6.57 
 
 1964 1.9 1.8 [d] 
 
 1.7 
 
 1.7 1.0 
 
 6.67 
 
 1963 1.8 1.7 
 
 [d] 
 
 1.7 
 
 1.6 1.0 
 
 6.71 
 
 1962 1.7 1.7 
 
 [d] 
 
 1.6 
 
 1.6 1.0 
 
 .2 
 
 6.80 
 
 a. Estimated as 5.6 per cent of national totals as given in Table 1, based on Illinois' percentage of total 
 United States shipments in 1967, Table 6. 
 
 b. Estimated by multiplying estimated United States sales, as given in Table 1, by Illinois' percentage of 
 United States consumption given in this table. 
 
 c. Derived from The Brewing Industry in the United States, Brewers Almanac, 197C , United States Brewers 
 Association, Inc., Washington, D. C, 1970, Table 42, p. 56. 
 
 d. Less than 100 million. 
 
 e. Estimated by the author. 
 
10 
 
 Conceivably, bottlers might continue to offer non-re turnables, retailers 
 might carry, and consumers might buy non-returnables in about the same pro- 
 portions after the regulation as they do today, but this seems an unlikely 
 outcome. National brand beer and soft drinks will cost more in non-return- 
 ables than in re turnables with the deposit included in both. There is almost 
 no advantage to be gained by the consumer in buying the higher priced non- 
 returnable which would justify his spending several cents more per container. 
 Thus a shift toward the returnable system seems likely. 
 
 Nevertheless, there are other possibilities. In British Columbia, re- 
 tailers apparently abandoned national brands and emphasized house-brands in 
 cans when a deposit regulation was imposed. The situation is hardly compar- 
 able to that in Illinois, however. The principal retail chain in British 
 Columbia had a much larger share of the market than any one chain has in Il- 
 linois and was, therefore, less subject to competition than an Illinois re- 
 tailer. Moreover, the motivation for the British Columbia retailer was dif- 
 ferent from the situation of the Illinois retailer. The British Columbia 
 retailer wished to avoid handling containers in the store and supported an 
 off-site redemption center system in which the national brand bottlers re- 
 fused to participate. Had the retailer continued to carry national brands 
 it would have been required to redeem them in the store. Moreover, the 
 deposit in British Columbia was only $.02, so that the price of the house 
 brand plus deposit was not as high as national brand returnables or cans. 
 In this instance it seems likely that the regulation may have led to an in- 
 crease in the consumption of beverages in non-returnables. 
 
 The situation in Oregon seems to be closer to what could be expected 
 in Illinois. Faced with a forthcoming deposit regulation, retailers an- 
 nounced that they will not carry national brands in non-returnables, but 
 will carry house brands in cans and national brands in returnables. For 
 soft drinks, at least, this seems likely to be the outcome. House brands 
 are cheaper than national brands because there is little advertising expense. 
 If there is in fact a considerable demand for nonre turnables, then consumers 
 may be willing to switch brands in order to obtain cans at prices close to 
 those of similar national brands in returnables. 
 
 The Illinois regulation will require retailers to provide onsite re- 
 demption of all containers sold. There is little advantage to the retailer's 
 excluding national brand non-returnables if consumers are willing to buy 
 them since he must establish can disposal facilities anyway. The willingness 
 of retailers to carry non-returnables will depend purely on the consumers ' 
 willingness to pay a -premium for the particular container. As it is today, 
 of course, consumers pay a considerable premium for beverages in cans over 
 those in bottles. 
 
 All in all, it seems likely that national brand soft drinks in cans will 
 decrease sharply as a result of the regulation, house brands may actually in- 
 crease somewhat, non-returnable bottles will largely disappear, and return- 
 able bottles will increase their share. 
 
 For beer, the situation is even more hazy. There may be a substantial 
 shift to returnables by local brewers, but premium national brands may go 
 even more to non-returnables than today. Overall, however, there probably 
 will be a tendency toward returnables since price influences consumer choice 
 in this market. 
 
11 
 
 Another possible factor both in beer and soft drinks is a greater em- 
 phasis on large containers. The advent of the resealable closure increases 
 the convenience of this container, the container cost is relatively less than 
 in small sizes, and there are advantages in handling and cooling the larger 
 container. At present, the price per ounce of soft drinks in quart containers 
 is not very much less than in the smaller sizes, but promotion of the con- 
 tainers and a little shading of present mark-ups might substantially improve 
 its market penetration. Beer is considerably cheaper in quarts than in small- 
 er sizes. The quart container might even survive in non-returnable form. 
 
 Costs to retailers . If some non-returnables persist in the market, many 
 of them will be returned for deposit. For example, about one-third of the 
 soft-drink cans sold in British Columbia were being returned, even though the 
 deposit is only $.02. The economics of redemption for the retailer depend 
 closely on the proportion of non-returnables which are returned. If consumers 
 discard a large proportion of the non-returnables they purchase and these are 
 not redeemed by other people, then the forfeited deposits will either mean 
 higher profits for retailers or they will be shifted forward to consumers in 
 the form of lower prices. If the retail industry is reasonably competitive, 
 as it appears to be, then the shift forward is the most likely outcome. If 
 none of the non-returnables were redeemed, an unlikely outcome, the retailer 
 could reduce his price by the full $.05 and thus offer the non-returnable 
 plus deposit at the same price as before the regulation. If non-returnables 
 are returned, however, the retailer will incur the cost of redeeming and dis- 
 posing of the containers, and this cost will also be passed forward in a com- 
 petitive market. If it costs a retailer $.01 to handle a return and the de- 
 posit is $.05 it is easily seen, by the following equation: 
 
 Profit = .05N - .01R 
 
 (N is the number of containers not returned, R is the number returned, and 
 N + R = Total Sales) that the retailer breaks even if as many as five-sixths 
 of his sales of non-returnables are returned. If less than five-sixths are 
 returned, he makes a profit. If his cost of handling is less than $.01 he can 
 make a profit with an even larger proportion of returns. No one really knows 
 what proportions of non-returnables will be redeemed, nor what redemption will 
 cost retailers. One estimate suggests a cost of $.01 to $.016 a bottle for 
 handling each returnable bottle [7]. If the total volume of non-returnables 
 in 1970 were replaced by returnables, the total cost to retailers would be 
 $27 million. Retailers would pay much less for the soft drinks and beer pur- 
 chased from manufacturers. This cost reduction should approximate $100 mil- 
 lion. 
 
 Cost to bottlers . A complete shift to returnables would increase some 
 costs for bottlers and reduce others. Labor costs are somewhat higher in de- 
 livering and picking up returnables. One downstate bottler paid a commission 
 of $.13 a case to drivers for non-returnables, $.115 for returnables, and 
 $.05 a case for empty returnables [1]. He reported his labor costs other than 
 delivery to be about the same for returnables and non-returnables and paid his 
 drivers fixed base salary per week in addition to the commission. A large 
 brewer in an adjacent state reported his total handling and delivery cost for 
 
12 
 
 returnables was about $.15 a case greater than for non-returnables [2]. The 
 brewer, of course, would be expected to have somewhat higher costs because of 
 the longer haul, but the cost range between $.035 and $.15 for a case of re- 
 turnables probably reflects important differences in cost accounting as well 
 as actual labor costs. Despite these differences, these figures are used 
 in the analysis of employment effects. 
 
 In addition to the labor costs, bottlers and brewers would have addi- 
 tional costs for transportation because returnables are considerably heavier 
 than non-returnables and a truck will carry more cases of non-returnables. 
 
 Moreover, bottlers and brewers would face significant capital losses 
 from canning lines rendered useless. The transportation costs other than 
 labor and these capital losses are important to these firms but they are 
 not considered in this analysis which is limited to employment issues. 
 
 Reduced sales of container manufacturers . Using average prices collected 
 in the Illinois beverage price survey and the estimated sales by container 
 type in Illinois, it is possible to estimate total spending of Illinois 
 consumers on beverages and how much of it is accounted for by container costs 
 [Table 4]. Of course, many beverage sales are made at other, usually higher, 
 prices, but the additional cost usually reflects a cost of service and can 
 be reasonably excluded from the reckoning without doing any real harm to the 
 analysis. 
 
 The estimated total arrived at this way comes to $827 million, based 
 on supermarket prices, of which $135 million represents container costs 
 [Table 4]. 
 
 To make the cost analysis of the conversion to returnables under the 
 regulation, it is assumed that the shift is a complete shift. While this 
 almost certainly will not occur, it is useful to approach the problem in this 
 way as it estimates extreme effects, and, at the same time, permits estima- 
 tion of the costs and benefits. 
 
 A complete shift to returnables would lead to a reduced outlay of $101 
 million in the cost of containers taking account of the cost of replacing 
 these containers with returnables at the assumed trippages [Table 5]. For 
 retailers, sales would be $756 million after a complete shift to returnables, 
 representing a reduction of $101 million in container costs and an increase 
 of $30 million in the costs of handling returns. Trippage might decrease 
 considerably in the event of a major shift to returnables, and this would in- 
 crease the costs of the returnable system. For instance, consumers who pre- 
 viously bought returnables would probably continue to do so after the regu- 
 lation, and the trippage of these bottles would probably increase. But trip- 
 page for this group is already rather high, indicating that about 95 per cent 
 of bottles are returned. Those consumers who bought non-returnables before 
 the deposit regulation would be forced to buy returnables under the assump- 
 tion of a complete shift to returnables, and the have already expressed their 
 willingness to pay a premium in order that they need not return the container. 
 No doubt they would return some of their containers (or scavengers would re- 
 turn some for them) , but it is doubtful that they would return as high a pro- 
 portion as those persons who formerly chose the returnables. If the trippage 
 of bottles bought by the former non-returnable customers were low enough, it 
 
TABLE 4 
 
 13 
 
 Estimated Sales of Beverages at Super Market Prices, Illinois, 1970 
 
 Beer 
 
 Returnable bottle (12 oz) 
 Non-returnable, bottle (12 oz) 
 Can 
 
 Total 
 
 
 
 
 
 Cost of 
 
 Total cost 
 
 Number of 
 
 units 
 
 Unit price 
 
 Sales 
 
 container 
 
 containers 
 
 (billions) 
 
 (cents) 
 
 (millions) 
 
 (cents) 
 
 (millions) 
 
 .6 
 
 
 20.0 
 
 120.0 
 
 .0061 [a] 
 
 3.6 
 
 .4 
 
 
 20.9 
 
 83.6 
 
 .03 
 
 12.0 
 
 1.1 
 
 
 21.6 
 
 237.6 
 
 .049 
 
 53.9 
 
 2.1 
 
 
 
 441.2 
 
 
 
 Soft drink 
 
 Returnable bottle (16 oz) 
 Non-returnable bottle (16 oz) 
 Can 
 
 Total 
 
 1.5 
 .5 
 .7 
 
 2.7 
 
 12.8 
 
 192.0 
 
 .0081 [b] 
 
 12-0 
 
 16.5 
 
 82.5 
 
 .0388 
 
 19.4 
 
 15.9 
 
 111.3 
 
 .049 
 
 34.3 
 
 
 385.8 
 
 
 65.7 
 
 Total Beverage 
 
 4.8 
 
 827.0 
 
 135.2 
 
 a. based on trippage of 20. 
 
 b. based on trippage of 16. 
 
 Source: Tables 2 and 3. 
 
11+ 
 
 Table 5 
 
 Beverage Sales and Container Cost for a 
 Complete Shift to Returnables 
 
 Container Cost 
 Number Price Sales Unit Total 
 
 (billions) (cents) (millions) (cents) (millions) 
 
 Beer 2-1 20.0 410.0 .0061 12.2 
 
 [a] 
 Soft drinks 2.7 12.8 345.6 .0081 21.9 
 
 Total 4.8 755.6 34.1 
 
 a. No adjustment is made for the replacement of 12 oz. cans by 16 oz. 
 bottles. 
 
 Source: Derived from tables 2 and 3, 
 
15 
 
 could offset any increase in trippage for the former returnable customers 
 with the result that overall trippage would decline. 
 
 The saving in outlay enjoyed by consumers is not a pure saving, for 
 there are offsetting losses to those consumers who have bought non-returnables 
 for their convenience. The simple fact that some consumers buy non-returnables 
 when they could have bought returnables shows that they value the convenience. 
 Critics of non-returnables will view the cost of the non-returnables as far 
 in excess of the value of the convenience, but most economists would argue that 
 insofar as the consumer had a choice of buying or not buying non-returnables, 
 he expressed his valuation of the convenience when he bought it. To those 
 economists, the cash saving to consumers is exactly offset by the value of the 
 convenience of which consumers were deprived. Some would go farther and ar- 
 gue that consumers have been deprived of or had to pay more for what they for- 
 merly purchased, and, therefore, the loss they experienced exceeded their cash 
 saving. 
 
 whatever the costs to consumers, they will devote most of the savings 
 from reduced cash outlay to purchases of other commodities. 
 
 In addition to the reduced outlay generated by the shift to returnables, 
 there will be costs for at least those consumers who do not return their con- 
 tainers for redemption. 
 
 Are forfeited deposits a cost to consumers? Suppose consumers continue 
 to purchase 4.8 billion units of beer and soft drinks after the deposit regu- 
 lation is imposed. At $.05, this represents an annual total deposit of $240 
 million, but not all of this will be outstanding at any one time since consumers 
 will return containers for redemption. For example, suppose 80 per cent of all 
 containers are redeemed, representing forfeited deposits of $48 million. This 
 is an obvious cost to those persons who do not return the containers, but, as 
 pointed out above, the retention of the forfeited deposits for non-returnable 
 containers represents either higher profits for retailers or is shifted for- 
 ward to consumers in the form of lower prices. Forfeited deposits on return- 
 able bottles will usually be shifted back to the bottler. In either instance, 
 the deposits forfeited by consumers will, in competitive markets, result in 
 lower prices than would have prevailed had the deposit not been paid. For non- 
 returnables, of course, no significant social cost (other than disposal cost) 
 is created by the failure to return a container which could not be reused or 
 did not possess a significant value as scrap. Thus the forfeited deposits for 
 non-returnables represent a pure transfer payment from those consumers who don't 
 return the containers to retailers or to all consumers. For returnables, how- 
 ever, the failure to return the bottle does represent a social cost, since it 
 must be replaced by another, but in this case the deposit simply serves to intei 
 nalize the costs in the part of the market which is most nearly responsible for 
 the cost, rather than diffusing it over all consumers as is the case when a 
 very low deposit is imposed. Moreover, if the larger deposit is effective in 
 increasing trippage of returnables, there will be a reduction in social cost as 
 a direct result of the imposition of the deposit . This result represents an ad- 
 ditional benefit of the regulation. 
 
 The forfeited deposits are a cost for those who make the decision not to 
 redeem the containers, but it is offset exactly by benefits to retailers and 
 
16 
 
 bottlers. In a competitive market the cost will largely be shifted forward 
 to consumers as a class (incidentally reducing the net cost to those who do 
 not redeem their bottles) . Because the market does not consist of two dis- 
 tinct classes of consumers — those who do and those who don't — it seems 
 quite likely that the net costs to most groups of consumers will be quite 
 small, and to consumers as a group, negligible. Moreover, these costs are 
 readily avoided by anyone who wishes to a""~>id them. He need only redeem 
 his containers. 
 
 To summarize this section, the following points suffice: 
 
 (1) total sales of beverages are unlikely to be 
 reduced very much below the level that would 
 have prevailed without the regulation. 
 
 (2) benefits to consumers in the form of reduced 
 unit prices of beverages in the event of a 
 complete shift to returnables would amount 
 to about $71 million. 
 
 (3) consumer savings will be spent on other consumer 
 goods. 
 
 (4) the shift to returnables is unlikely to be com- 
 plete. 
 
 (5) retailers will incur increased costs of handling 
 containers which may amount to $27 million in the 
 event of a complete shift to returnables. 
 
 (6) bottlers and brewers will incur increased labor 
 costs at the rate of a fraction of a cent per 
 unit, but a reduction in purchases of containers 
 of about $100 million. 
 
 (7) container manufacturers will experience a reduc- 
 tion in container sales of about $100 million. 
 
 The next section considers the detailed cost and employment effects 
 arising from the shift to returnables. 
 
 V. Employment Effects of the Deposit Regulation 
 
 The effects on employment of a complete shift to returnables are estim- 
 ated in this section. This approach permits measurement of the maximum ef- 
 fects on displacement. Such a shift is not to be expected, and the effects 
 of any specific shift, such as 50 per cent or 75 per cent can be made by 
 taking the appropriate proportion of the effects estimated here. 
 
 A complete shift to returnables would lead to an increase in total em- 
 ployment rather than a decrease according to the estimates presented here. 
 The reason is the high labor intensiveness of the returnable system. This 
 result is true even if the employment created by the diversion of consumer 
 expenditures to other goods is ignored. However, these offsetting expendi- 
 tures and employment effects should not be ignored. 
 
17 
 
 Employment Reductions. To estimate the direct effect of the assumed 
 complete shift to returnables, the estimated reductions in sales of con- 
 tainers are applied to total shipments of the industry to determine the 
 proportionate reduction. The same proportionate reduction is then applied 
 to total employment in the industry to estimate the implied reduction. For 
 1970 the following reductions were estimated in Tables 4 and 5 above: 
 
 Change in Sales-Millions of Dollars 
 
 Beer Soft Drink Total 
 
 Reduction in can sales -53.9 -34.3 -88.2 
 
 Reduction in non-returnables 
 
 bottle sales -12.0 -19.4 -31.4 
 
 Increase in returnable bottle 
 
 
 
 
 sales 
 
 8.6 
 
 9.9 
 
 18.5 
 
 Net change in bottles 
 
 - 3.4 
 
 - 9.5 
 
 -12.9 
 
 Net change in container 
 
 sales -57.3 -43.8 -101.1 
 
 A reduction of $88.2 million of can sales represents a 2.4 per cent re- 
 duction in total national sales of cans [Table 6]. If employment in the 
 metal can industry were reduced proportionately there would be a reduction 
 of 1,605 workers [Table 7], 
 
 A net reduction of $12.9 million of bottle sales would be about 0.8 
 per cent of total national glass container sales. If employment were re- 
 duced proportionately in this industry, there would be a reduction of about 
 554 workers. 
 
 The reductions represent a significant fraction of Illinois employment 
 in these industries. The 1,605 metal can workers represent about 16.7 per 
 cent of Illinois employment in the industry, and the 554 glass container 
 workers represent about 5.2 per cent of Illinois employment in the industry. 
 Because these industries are heavily concentrated in Illinois, it seems 
 likely that a very large proportion of the reductions in can and glass con- 
 tainer employment induced by a complete shift to returnables would occur in 
 Illinois. 
 
 Another direct effect of a complete shift to returnables is the expected 
 decrease in litter collection and solid waste disposal costs of about $3.3 
 million. Such a reduction concentrated entirely in labor costs would repre- 
 sent about 550 workers if such workers earned about $6,000 a year. 
 
 In addition to these direct effects of the mandatory deposit regulation, 
 there will be indirect effects caused by the reduction of purchases by the 
 directly impacted industries. 
 
18 
 
 TABLE 6 
 
 Value of Shipments and Value Added by Manufacture In Selected Industries Related to Beer and Soft Drink 
 Manufacture and Sales, United States and Illinois, 1968-1969 
 ( millions of dollars ) 
 
 Year 
 
 1969 
 
 1968 
 
 1967 
 
 1966 
 
 1965 
 
 1964 
 
 1963 
 
 1962 
 
 1961 
 
 1960 
 
 1959 
 
 1958 
 
 Source 
 
 ASM 
 
 ASM 
 
 Census 
 
 ASM 
 
 ASM 
 
 ASM 
 
 Census 
 
 ASM 
 
 ASM 
 
 ASM 
 
 ASM 
 
 Census 
 
 Glass 
 
 containers 
 
 3221 
 
 Metal 
 
 cans 
 
 3411 
 
 Beer Bottled 
 
 whole- Malt and canned Glass 
 
 salers liquors soft drinks containers 
 
 1,664.7 
 1,407.3 
 1,352.4 
 1,207.5 
 1,091.8 
 1,055.9 
 1,004.5 
 987.6 
 967.4 
 939.2 
 915.6 
 862.1 
 
 Value added by manufacture 
 1967 Census 842.2 
 1963 Census 629.6 
 
 5095 
 
 2082 
 
 2086 
 
 3,620.7 3,418.5 
 
 3,332.1 3,160.5 
 
 2.890.6 4,990.4 2,929.7 
 
 2.631.3 2,699.9 
 2.395.0 2,497.2 
 
 2.255.7 2,469.8 
 
 2.075.0 3,748.6 2,315.1 
 
 2.112.4 2,282.0 
 
 2.095.3 2,200.0 
 
 1.936.4 2,179.5 
 1,933.7 2,095.4 
 
 1.824.1 1,982.7 
 
 1,141.5 
 830.5 
 
 4,065.7 
 
 3,574.7 
 
 3,173.2 
 
 2,734.9 
 
 2,505.4 
 
 2,408.8 
 
 2,210.9 
 
 2,030.9 
 
 1,911.4 
 
 1,806.1 
 
 1,714.4 
 
 1,558.3 
 
 1,679.4 
 1,233.6 
 
 3221 
 
 Metal 
 
 cans 
 
 3411 
 
 196.5 
 
 349.1 
 
 121.4 
 102.9 
 
 151.9 
 140.4 
 
 Beer Bottled 
 
 whole- Malt and canned 
 
 salers liquors soft drinks 
 
 5095 fal 208j_ 2086 
 
 340.6 
 
 153.8 [b] 178.2 
 
 293.2 
 
 69.2 
 62.9 
 
 [b] 
 
 94.2 
 69.8 
 
 a. Only that part of the Beer, wine, distilled alcoholic beverages industry related to beer and ale. 
 
 b. SIC 2082, 2083, and 2084 combined. 
 
 Source: U. S. Department of Commerce, Bureau of the Census, Census o f Manufactures 1958 196T anrf iqa 7 4 
 
 of Manufactures , 1959, 1960, 1961. 1962, 1964, 1965, 1966, 1968 196^ Cens us of^JllLT y^ 7 \ ^f^^L 
 
19 
 
 TABLE 7 
 
 Estimated Employment in Selected Industries Related to Beer and Soft Drink Manufacture and Sales, United States and Illinois 
 
 1968-1970 
 ( thousands of workers ) 
 
 
 
 
 
 United States 
 
 
 
 
 Illinois 
 
 
 
 
 
 
 Beer 
 
 
 Bottled 
 
 
 
 Beer 
 
 
 Bottled 
 
 
 
 Glass 
 
 Metal 
 
 whole- 
 
 Malt 
 
 and canned 
 
 Glass 
 
 Metal 
 
 whole 
 
 Malt 
 
 and canned 
 
 SIC Code 
 
 
 containers 
 
 cans 
 
 salers 
 
 liquors 
 
 soft drinks 
 
 containers 
 
 cans 
 
 salers 
 
 liquors 
 
 soft drinks 
 
 Year 
 
 Source 
 CBP 
 
 3221 
 
 3411 
 65.9 
 
 5095 
 101.9 
 
 2082 
 56.3 
 
 2086 
 
 3221 
 
 3411 
 9.6 [c l 
 
 5095[a] 
 7.0 
 
 2082 
 2.1 
 
 2082 
 
 1970 [b] 
 
 68.9 [b] 
 
 124.6 
 
 10.3 
 
 6.1 
 
 1969 [b] 
 
 CBP 
 
 69.2 [bl 
 
 63.9 
 
 
 57.2 
 
 122.7 
 
 11.6 
 
 9.7^ 
 
 
 2.2 
 
 6.1 
 
 1969 
 
 ASM 
 
 71.5 
 
 68.1 
 
 
 58.1 
 
 128.6 
 
 
 
 
 
 
 1968 
 
 ASM 
 
 63.9 
 
 63.1 
 
 
 59.8 
 
 125.2 
 
 
 
 
 
 
 1967 
 
 Census 
 
 66.7 
 
 60.3 
 
 
 59.6 
 
 123.3 
 
 10.0 
 
 10.4 
 
 
 2.8 [dl 
 
 6.3 
 
 1966 
 
 ASM 
 
 64.5 
 
 58.7 
 
 
 60.5 
 
 117.7 
 
 
 
 
 
 
 1965 
 
 ASM 
 
 61.5 
 
 54.9 
 
 
 60.4 
 
 113.9 
 
 
 
 
 
 
 1964 
 
 ASM 
 
 60.4 
 
 55.1 
 
 
 61.9 
 
 111.1 
 
 
 
 
 
 
 1963 
 
 Census 
 
 60.0 
 
 53.2 
 
 
 62.6 
 
 106.8 
 
 9.2 
 
 10.1 
 
 
 5.4 
 
 5.2 
 
 1962 
 
 ASM 
 
 60.0 
 
 53.1 
 
 
 66.0 
 
 105.4 
 
 
 
 
 
 
 1961 
 
 ASM 
 
 60.2 
 
 53.4 
 
 
 68.2 
 
 104.1 
 
 
 
 
 
 
 1960 
 
 ASM 
 
 58.5 
 
 53.6 
 
 
 69.8 
 
 103.3 
 
 
 
 
 
 
 1959 
 
 ASM 
 
 56.2 
 
 53.8 
 
 
 70.9 
 
 100.0 
 
 
 
 
 
 
 1958 
 
 Census 
 
 54.9 
 
 54.9 
 
 
 71.7 
 
 97.1 
 
 
 
 
 
 
 a. Total. Not comparable to industry in Table 6. 
 
 b. County Business Patterns data based on mid-March covered FICA employment. Not comparable to Census and Annual Survey 
 of Manufactures data. 
 
 c. SIC 341 
 
 d. SIC 2082, 2083, and 2084 combined. 
 
 Source: U. S. Department of Commerce, Bureau of the Census, Census of Manufactures, 1958, 1963, and 1967; Annual Survey 
 of Manufacturers, 1959, 1960, 1961, 1962, 1964, 1965, 1966, 1968, 1969; County Business Patterns , 1969 and 1970. 
 
20 
 
 To estimate the indirect effects of the reductions in can and bottle 
 sales, an input-output analysis of the industries has been carried out. 
 For 1963 a detailed industry input-output table for the United States is 
 available [11]. For any final product (such as metal cans in our analysis), 
 the total requirement coefficients estimate the amount of input from any 
 industry (such as blast furnace and basic steel products) required to pro- 
 duce a dollar of output delivered to final demand. For steel into metal 
 cans, this coefficient is .53993, indicating that about $.54 of steel is 
 used as input to every $1.00 of metal cans delivered to final demand. The 
 total requirements coefficient includes both direct inputs of steel to metal 
 cans and the inputs of steel to other industries' outputs used in the pro- 
 duction of metal cans (such as railroads) . 
 
 When the total requirements coefficients for the industries which sup- 
 ply significant inputs to the impacted industries are multiplied by the es- 
 timated reduction in can and bottle sales induced by a complete shift to re- 
 turnables, estimated reductions in inputs to the can and glass container in- 
 dustries are obtained. These estimates are listed in Tables 8 and 9. To 
 obtain estimates of employment reductions caused by the reduction in inputs 
 to the can and glass container industries, the ratio of total employment to 
 total shipments is estimated. When this ratio for each industry is multi- 
 plied by the corresponding reduction in demand, the estimated reduction in 
 employment is obtained. 
 
 The indirect employment reductions resulting from a complete shift to 
 returnables would be about 3,000 workers in the industries supplying the 
 metal can industry and about 200 workers in the industries supplying the 
 glass container industry. In making these calculations, only industries for 
 which the total requirements coefficient was .01 or larger were considered. 
 The effect of including the omitted industries would amount to at most an- 
 other 100 or 200 workers and these would be widely distributed among the 
 more than three hundred omitted industries. Not all of the reduction in 
 employment estimated in this analysis would occur in Illinois. Illinois 
 has no significant employment in many of the industries affected (such as 
 the mining of iron ore). Lacking an inter-regional input-output model, it 
 is impossible to estimate how many Illinois workers would be affected, but 
 the estimates given are the maximum effects. The analysis was carried out 
 on 1963 data (which is the most recent available) . This old data certainly 
 biases the estimates upwards, since labor productivity has increased in most 
 industries in the past eight years. Thus, such errors of estimation as 
 exist tend in the direction of overestimating rather than underestimating 
 the Illinois employment effects. 
 
 Increases in Employment . The effect of a complete shift to returnables 
 in increasing employment would be concentrated in retail trade, soft drink 
 bottlers, and brewers and beer distributors. For retailers, it has been 
 estimated that the cost of handling a single container return amounts to ap- 
 proximately $.01. Total costs of a shift from .6 billion containers of beer 
 in returnables to 2.1 billion containers of beer in returnables would amount 
 to approximately $15 million. For soft drinks, the shift from 1.5 billion 
 containers of returnables to 2.7 billion containers of returnables would 
 amount to $12 million. The total costs to retailers of $27 million is quite 
 close to the additional costs to retailers of $30 million which can be de- 
 rived from the estimated reduction in sales of $71 million and the estimated 
 
21 
 
 TABLE 8 
 
 Total Requirements Coefficients, Shipments, Employment, Ratio of Employment to 
 
 Shipments, Employment per Million Dollars of Metal Cans Delivered to Final 
 
 Demand and Estimated Reduction in Employment Resulting from a Complete 
 
 Shift to Returnables, Illinois, Selected Industries 
 
 Industry (SIC Code) 
 
 Coal mining (11,12) 
 Petroleum and gas (1311,2) 
 Paper mills (2611) 
 Paperboard mills (2631) 
 Paperboard cont'rs (265) 
 Commercial printing (2751,2) 
 Ind'l chemicals (281) 
 Paints (2851) 
 Petr. refining (2911,299) 
 Basic steel (331) 
 Prim, aluminum (3334) 
 Alum, rolling (3352) 
 Railroads (40,474) 
 Motor freight (42,473) 
 Water transport (44) 
 Electric util. (491, pt. 493) 
 Gas utilities (492, pt. 493) 
 Wholesale trade (50) 
 Credit agencies (61,67) 
 Misc. bus. serv. (73,769 ) 
 Advertising (731) 
 
 
 
 
 
 
 Employ- 
 
 
 
 
 
 
 Employ- 
 
 ment per 
 
 
 
 
 
 
 ment per 
 
 million 
 
 
 Input- 
 
 Total 
 
 Ship- 
 
 Employ- 
 
 thousand 
 
 dollars 
 
 Total 
 
 Output 
 
 requ' ts 
 
 ments 
 
 ment [a] 
 
 dollars 
 
 of 
 
 employment 
 
 Ind. No. 
 
 coef . 
 
 ($million) 
 
 (thous. ) 
 
 shipments 
 
 demand 
 
 reduction 
 
 7.0 
 
 .01709 
 
 2.636.8 
 
 149.0 
 
 .0565 
 
 .9656 
 
 85 
 
 8.0 
 
 .01180 
 
 12,264.7 
 
 163.8 
 
 .0133 
 
 .1569 
 
 14 
 
 24.02 
 
 .01013 
 
 5,054.4 
 ) 
 2,557.4 
 
 65.4 
 
 .0086 
 
 .2013 
 
 18 
 
 24.03 
 
 .01013 
 
 
 
 
 
 25.00 
 
 .02421 
 
 4,748.3 
 
 189.7 
 
 .0400 
 
 .9684 
 
 85 
 
 26.05 
 
 .04764 
 
 5,307.2 
 
 285.9 
 
 .0537 
 
 2.5583 
 
 226 
 
 27.01 
 
 .03219 
 
 12,613.2 
 
 284.6 
 
 .0226 
 
 .7275 
 
 64 
 
 30.00 
 
 .03006 
 
 2,462.1 
 
 62.9 
 
 .0255 
 
 .7665 
 
 68 
 
 31.01 
 
 .01728 
 
 20,858.5 
 
 188.8 
 
 .0091 
 
 .1572 
 
 14 
 
 37.01 
 
 .53993 
 
 19,988.6 
 
 589.9 
 
 .0295 
 
 15.9279 
 
 1,405 
 
 38.04 
 
 .01179 
 
 1,969.8 
 
 21.4 
 
 .0109 
 
 .1285 
 
 11 
 
 38.08 
 
 .01843 
 
 2,310.1 
 
 60.9 
 
 .0264 
 
 .4866 
 
 43 
 
 65.01 
 
 .03775 
 
 11,142.9 
 
 771.6 
 
 .0692 
 
 2.6123 
 
 230 
 
 65.03 
 
 .02452 
 
 13,486.3 
 
 903.5 
 
 .0670 
 
 1.6428 
 
 145 
 
 65.04 
 
 .01115 
 
 5,033.9 
 
 302.2 
 
 .0600 
 
 .6690 
 
 59 
 
 68.01 
 
 .01912 
 
 15,427.1 
 
 246.2 
 
 .0160 
 
 .3059 
 
 27 
 
 68.02 
 
 .01868 
 
 11,301.8 
 
 153.3 
 
 .0136 
 
 .2540 
 
 22 
 
 69.01 
 
 .05826 
 
 48,440.3 
 
 3,104.0 
 
 .0641 
 
 3.7345 
 
 329 
 
 70.01 
 
 .02755 
 
 45,160.9 
 
 379.0 
 
 .0084 
 
 .2314 
 
 20 
 
 73.01 
 
 .01919 
 
 13,372.6 
 ) 
 12,698.7 
 
 943.2 
 
 .0362 
 
 1.3948 
 
 123 
 
 73.02 
 
 .01934 
 
 
 
 
 
 a. Employment industry may differ slightly from Input-Output Industry by inclusion or exclusion of small three or 
 four-digit industries. 
 
 Sources: Total Requirements Coefficients, Shipments: U. S. Department of Commerce, Office of Business Economics, 
 Input-Output Structure of the U. S. Economy: 1963 , Vol. 3, U. S. Government Printing Office, 1969. 
 
 Employment: U. S. Department of Labor, Bureau of Labor Statistics, Employment and Earnings, United 
 States, 1909-70 , Bulletin 1312-7, U. S. Government Printing Office, no date. 
 
22 
 
 TABLE 9 
 
 Total Requirements Coefficients, Shipments, Employment, Ratio of Employment to 
 
 Shipments, Employment per Million Dollars of Glass Containers Delivered to 
 
 Final Demand and Estimated Reduction in Employment Resulting from a 
 
 Complete Shift to Returnables, Illinois, Selected Industries 
 
 Industry (SIC Code) 
 
 
 
 
 
 
 Employ- 
 
 
 
 
 
 
 Employ- 
 
 ment per 
 
 
 
 
 
 
 ment per 
 
 million 
 
 
 Input- 
 
 Total 
 
 Ship- 
 
 Employ- 
 
 thousand 
 
 dollars 
 
 Total 
 
 Output 
 
 requ 1 ts 
 
 ments 
 
 ment [a] 
 
 dollars 
 
 of 
 
 employment 
 
 Ind. No. 
 
 coef . 
 
 ($tnillion) 
 
 (thous. ) 
 
 shipments 
 
 demand 
 
 reduction 
 
 Stone & clay mining 
 (141, etc) 
 
 Petroleum and gas (1311,2) 
 
 Paperboard mills (2631) 
 
 Paperboard cont'rs (265) 
 
 Ind'l chemicals (281) 
 
 Petr. refining (2911,299) 
 
 Abrasive prod. (3291) 
 
 Motor freight (42,473) 
 
 Electric util. (491, pt. 493) 
 
 Gas utilities (492, pt. 493) 
 
 Wholesale trade (50) 
 
 Credit agencies (61,67) 
 
 Misc. bus. serv. (73,7694) 
 
 Advertising (731) 
 
 9.0 
 
 .02581 
 
 2,024.1 
 
 81.5 
 
 .0403 
 
 1.0401 
 
 13 
 
 8.0 
 
 .01180 
 
 12,264.7 
 
 163.8 
 
 .0133 
 
 .1569 
 
 14 
 
 24.03 
 
 .03976 
 
 2,557.4 
 
 20.0 
 
 .0078 
 
 .3101 
 
 4 
 
 25.00 
 
 .10465 
 
 4,748.3 
 
 189.7 
 
 .0400 
 
 4.1860 
 
 54 
 
 27.01 
 
 .12919 
 
 12,613.2 
 
 284.6 
 
 .0226 
 
 2.9200 
 
 38 
 
 31.01 
 
 .02387 
 
 20,858.5 
 
 188.8 
 
 .0091 
 
 .1572 
 
 3 
 
 36.16 
 
 .01939 
 
 744.8 
 
 23.4 
 
 .0314 
 
 .6088 
 
 8 
 
 65.03 
 
 .02047 
 
 13,486.3 
 
 908.5 
 
 .0670 
 
 1.3715 
 
 18 
 
 68.01 
 
 .02421 
 
 15,427.1 
 
 246.2 
 
 .0160 
 
 .3059 
 
 5 
 
 68.02 
 
 .06352 
 
 11,301.8 
 
 153.3 
 
 .0136 
 
 .2540 
 
 11 
 
 69.01 
 
 .03516 
 
 48,440.3 
 
 3,104.0 
 
 .0641 
 
 2.2538 
 
 29 
 
 70.01 
 
 .02663 
 
 45,160.9 
 
 379.0 
 
 .0084 
 
 .2237 
 
 3 
 
 73.01 
 
 .02033 
 
 13,372.6 
 1 
 12,698.7 
 
 943.2 
 
 .0362 
 
 1.1055 
 
 14 
 
 73.02 
 
 .01221 
 
 
 
 
 
 a. Employment industry may differ slightly from Input-Output Industry by inclusion or exclusion of small three- 
 or four-digit industries. 
 
 Sources: Total Requirements Coefficients, Shipment: U. S. Department of Commerce, Office of Business Economics, 
 Input-Output Structure of the U. S. Economy: 1963 , Vol. 3, Washington, D. C: U. S. Government Printing 
 Office, 1969. 
 
 Employment: U. S. Department of Labor, Bureau of Labor Statistics, Employment and Earnings, United 
 States, 1909-70 , Bulleting 1312-7, Washington, D. C. : U. S. Government Printing Office, no date. 
 
23 
 
 reduction in container costs of $101 million. Consumer savings are only about 
 70 per cent of the total reduction in sales of containers, the balance repre- 
 senting the costs to retailers of handling the returns. 
 
 Assuming that the unskilled labor employed to handle bottle returns is 
 paid $2.00 an hour or about $4,000 a year, the $27 million of retailer costs 
 represents an increase in employment of about 6,750 workers. 
 
 The estimated additional costs of the returnable system to bottlers is 
 about $.0015 per returnable, representing additional total costs to bottlers of 
 about $1.8 million. Most of this cost represents additional employment of driv- 
 er-salesmen. At an annual wage of $15,000 this represents an increase of about 
 120 workers. This estimate is perhaps low because it is based on data from one 
 bottler and is much below the additional unit costs experienced by the brewer 
 considered in this study. 
 
 For brewers and beer distributors, the additional costs of returnables are 
 estimated at $.00625 per bottle, so the increase of 1.5 billion returnables rep- 
 resents increased costs of $9.4 million. At an annual wage for drivers of 
 $15,000, this amount represents an increase of about 627 workers. 
 
 Most of the increased employment effects in retail trade and soft-drink 
 bottlers will be local Illinois effects. Some of the increased employment for 
 brewers and distributors will be outside of Illinois. 
 
 The employment reductions and increases resulting from a complete shift to 
 returnables can be summarized as follows: 
 
 Reductions in employment 
 
 Metal cans 1,605 
 
 Glass containers 554 
 
 Litter collection and waste disposal 550 
 
 Indirect employment effects from metal cans 2,988 
 
 Indirect employment effects from glass containers 214 
 
 Total reductions 5,911 
 
 Increases in employment 
 
 Retail trade 6,750 
 
 Soft-drink bottlers 120 
 
 Brewers and beer distributors 627 
 
 Total increases 7,497 
 
 Net increase in employment 1,580 
 
2k 
 
 In addition to these effects, about $71.4 million of consumer expendi- 
 tures will be diverted to other consumer goods from beverages. This rep- 
 resents about .007 per cent of GNP. This expenditure would induce about 
 5,000 additional jobs in the consumer industries and those which furnish 
 inputs to consumer industries. Thus the total employment effects of the 
 mandatory deposit regulation and a complete shift to returnables should be 
 about 6,600 additional jobs. 
 
 VI. Summary and Conclusions 
 
 The previous section indicates that the deposit regulation will increase 
 employment by about 6,600 jobs if there is a complete shift to returnables. 
 There is little reason to expect that the shift will be complete, but there 
 will probably be a substantial shift toward returnables. Such a partial 
 shift will reduce the employment effects of the regulation, and, at the same 
 time, reduce the pressure on the heavily impacted industries. It was not 
 possible to estimate with any precision the location of the disemployment ef- 
 fects. It is likely that nearly all of the direct reductions will occur in 
 Illinois and one-half or more of the indirect effects as well. Except for 
 the metal can industry, the reductions are relatively small in relation to 
 total employment in the industry. 
 
 No one would ignore a 5 per cent reduction in glass bottle employment, 
 but this industry has a voluntary quit rate of close to 2 per cent per month 
 according to the Bureau of Labor Statistics, and this suggests that the re- 
 quired reduction in employment could be absorbed through normal quits in no 
 more than three months. This is particularly true in that the immediate im- 
 pact would be substantial stocking up by bottlers of returnable bottles as 
 they shifted to the returnable system. The immediate impact of the regula- 
 tion might well be an increase in employment in glass containers. Later, 
 however, there would probably be a decline to a lower level as demand fell 
 back to replacement rates. 
 
 The situation is much less simple for the metal can industry. The quit 
 rate in metal containers is much lower than in glass containers, about 1 per 
 cent a month rather than 2 per cent. The much larger proportionate employ- 
 ment effect of 17 per cent would require more than a year to absorb through 
 voluntary quits. This fact suggests that some delay in the imposition of 
 the regulation would ease the necessary employment adjustment. With the less 
 than complete shift to returnables which can be expected and a period of nine 
 months or a year over which bottlers could prepare to shift to returnables, 
 the impact on metal can sales would be less sudden. 
 
 While there is an increase in employment to be expected as a result of 
 the regulation, it must at the same time be recognized that workers in metal 
 cans, steel, and glass containers face the risk of some injury. Transitions 
 are seldom smooth and there will unquestionably be some layoffs in these in- 
 dustries resulting from the adoption of the regulation. Fortunately, many 
 of the workers in the industries are members of effective trade unions which 
 have negotiated supplemental unemployment benefit programs which will sharply 
 reduce the income loss effects of any necessary displacement. 
 
25 
 
 The economic costs and benefits of the employment changes are important 
 components of the dec is ion -making process on this question. The fact that some 
 workers will be displaced and that many new jobs widely distributed across the 
 state will be created are quite worth noticing, but it is not necessary to stress 
 these adjustments too much. The changes induced by adoption of the regulation 
 will not be sudden but will take place at a pace which will allow adjustments 
 to be made by firms and workers. The labor market is likely to improve during 
 the next few years as the nation recovers from the most recent recession. The 
 process of redistribution of employment among economic activities is a normal 
 part of economic development and the changes which are likely to occur in this 
 instance are not particularly large in terms of adjustments which normally occur 
 
26 
 
 References 
 
 
 1. Anonymous bottler. 
 
 2. Anonymous bottler. 
 
 3. Beverage Containers, Recommendations of the Illinois Solid Waste 
 Management Task Force . Illinois Institute of Environmental Quality. 
 Springfield, 1971. 
 
 4. Tom Joyce, Solid Waste - - Litter , Memorandum to the Task Force on 
 Solid Waste Source Reduction. Illinois Institute of Environmental 
 Quality, August 10, 1971. 
 
 5. Midwest Research Institute, The Role of Packaging in Solid Waste 
 Management . Environmental Protection Agency, Bureau of Solid Waste 
 Management. Washington, D. C. : U. S. Government Printing Office. 
 1969. 
 
 6. Sidney P, Mudd. Letter to Bernard C. Smith, chairman, New York 
 State Senate Committee on Conservation and Recreation. May 24, 1971. 
 
 7. National Association of Food Chains. Testimony of Mr. Paul A. Karody, Jr., 
 before Prince Georges County Maryland Council, November 2, 1971. 
 
 8. Bernard Udis, Editor. Adjustments of the U. S. Economy to Reductions 
 
 in Military Spending . U. S. Arms Control and Disarmament Agency. Wash- 
 ington, D. C: U. S. Government Printing Office. 1970. 
 
 9. United States Brewers Association, Inc. The Brewing Industry in the United 
 States , Brewers Almanac, 1970. Washington, D. C. 1970. 
 
 10. U. S. Department of Commerce, Bureau of the Census. Census of Business . 
 Vol. III. Washington, D. C. : U. S. Government Printing Office. 
 
 11. U. S. Department of Commerce, Office of Business Economics, Input-Output 
 Structure of the U. S. Economy: 1963 , Vol. 3. 
 
Paper No. 2 
 
 EMPLOYMENT EFFECTS OF A BAN ON NONRETURNABLE 
 BEVERAGE CONTAINERS IN MINNESOTA 
 
27 
 
 ABSTRACT 
 
 A ban on nonreturnable containers will have significant employment 
 effects on the soft drink, and beer industries in Minnesota. 
 
 This report attempts to identify the economic effects and to measure 
 the impact of a ban on consumer costs and employment in Minnesota. The 
 methods followed correspond closely to that in the previous study 
 of the employment effects of mandatory deposit regulations made for 
 Illinois [1], but somewhat better data and industry information has 
 been available for this study. 
 
 Most of the conclusions reached in this study would also apply to 
 a mandatory deposit law which did not ban nonreturnables . The Illinois 
 analysis, for instance, was based on the assumption that mandatory 
 deposits would lead to an essentially complete shift from nonreturnables 
 to returnables. The degree of such a shift, however, is open to 
 argument, and it can be expected that nonreturnables would persist in 
 some sales situations despite the imposition of a mandatory deposit. 
 
28 
 
 I. Expenditure Flows and Employment 
 
 The analysis is based on the changes in employment that result 
 from changes in the flow of expenditure. The underlying principles 
 are quite simple: 
 
 1. A decrease in the sale of beverage in one-way containers 
 resulting from a ban leads to reduced labor demand for 
 production and distribution, which are termed "the direct 
 negative employment effects." 
 
 2. A decrease in sales leads to reduced demand for inputs to the 
 production process, which in turn leads to reduced labor 
 demands in the industries supplying the inputs. These 
 employment effects are termed "indirect negative employment 
 effects." 
 
 3. A decrease in consumer spending on beverages in one-way containers 
 permits consumers to spend more on purchases of other commodities | 
 generating a stream of positive direct and indirect effects 
 arising from production and sale of the new commodities 
 purchased. 
 
 4. If consumers do not spend the same amounts in aggregate 
 before and after the ban, the reduction or increase in 
 consumer spending will lead to negative or positive employ- 
 ment effects which are termed "induced employment effects." 
 
29 
 
 In the following analysis it is assumed that consumers continue to 
 spend the same amount before and after the ban on beverages and other 
 
 products, hence, there are no induced spending effects. This is a 
 
 reasonable assumption since beverages in cans and nonreturnable bottles 
 have very close substitutes in the corresponding beverages in returnable 
 bottles. Moreover, beverages are a relatively small proportion of all 
 consumer spending, hence, the change in packaging systems should not 
 have a large aggregate effects. 
 
 As a general proposition, the assumption of no change in spending 
 requires that aggregate national wages will not change as a result of 
 a ban in one state, but employment may change. It may increase, for 
 instance, if spending is diverted from high-wage industries to low- 
 wage industries. Employment and wages within the state may change 
 as well, if the ban leads to a substitution of local production, 
 distribution, and sales employment for out-of-state employment the 
 result could be increase in employment and wages in the state. 
 
 The principal questions involved are the (1) the effects of a 
 ban on total sales of beverages; (2) the employment generated in 
 Minnesota in the nonreturnable beverage and container industry before 
 and after a ban; and (3) the effects of the ban on the sale of 
 national brand out-of-state beers and nationally canned controlled- 
 label soft drinks canned out-of-state. 
 
28 
 
 I. Expenditure Flows and Employment 
 
 The analysis is based on the changes in employment that result 
 from changes in the flow of expenditure. The underlying principles 
 are quite simple: 
 
 1. A decrease in the sale of beverage in one-way containers 
 resulting from a ban leads to reduced labor demand for 
 production and distribution, which are termed "the direct 
 negative employment effects." 
 
 2. A decrease in sales leads to reduced demand for inputs to the 
 production process, which in turn leads to reduced labor 
 demands in the industries supplying the inputs. These 
 employment effects are termed "indirect negative employment 
 effects." 
 
 3. A decrease in consumer spending on beverages in one-way containers 
 permits consumers to spend more on purchases of other commodities 
 generating a stream of positive direct and indirect effects 
 arising from production and sale of the new commodities 
 purchased. 
 
 4. If consumers do not spend the same amounts in aggregate 
 before and after the ban, the reduction or increase in 
 consumer spending will lead to negative or positive employ- 
 ment effects which are termed "induced employment effects." 
 
29 
 
 In the following analysis it is assumed that consumers continue to 
 spend the same amount before and after the ban on beverages and other 
 
 products, hence, there are no induced spending effects. This is a 
 
 reasonable assumption since beverages in cans and nonreturnable bottles 
 have very close substitutes in the corresponding beverages in returnable 
 bottles. Moreover, beverages are a relatively small proportion of all 
 consumer spending, hence, the change in packaging systems should not 
 have a large aggregate effects. 
 
 As a general proposition, the assumption of no change in spending 
 requires that aggregate national wages will not change as a result of 
 a ban in one state, but employment may change. It may increase, for 
 instance, if spending is diverted from high-wage industries to low- 
 wage industries. Employment and wages within the state may change 
 as well, if the ban leads to a substitution of local production, 
 distribution, and sales employment for out-of-state employment the 
 result could be increase in employment and wages in the state. 
 
 The principal questions involved are the (1) the effects of a 
 ban on total sales of beverages; (2) the employment generated in 
 Minnesota in the nonreturnable beverage and container industry before 
 and after a ban; and (3) the effects of the ban on the sale of 
 national brand out-of-state beers and nationally canned controlled- 
 label soft drinks canned out-of-state. 
 
30 
 
 II. Effect of a Ban on Beverage Sales 
 
 There is little experience to draw on in other states concerning 
 the effect of a ban on one-way containers on total beverage sales. 
 Oregon's law requiring a mandatory five cents deposit on all beverage 
 containers and banning the pull tab has only been in effect since October 
 1, 1972, and there is no report available of its effects on soft drink 
 sales. Beer sales in November and December were higher for 1972 than for 
 the same months in 1971; according to William Moore, assistant director 
 of inventory enforcement for the Oregon Liquor Commission [2]. October 
 1972 sales were 50 percent higher than October 1971 (probably because of 
 inventory building of returnables), while for the first eleven months of 
 1972 sales were 6.6 percent higher than in the corresponding period of 
 1971? according to Mr. Moore. Since Mr. Moore reports that very few 
 drinks are being sold in cans, the Oregon situation may be though compar- 
 able to what would happen in the event of a ban. 
 
 Such demand estimates for beer and soft drinks as have been made 
 suggest that demand is price inelastic [3]> i.e., that a one percent in- 
 crease in price would lead to only a 0.2 percent decrease in sales. Since 
 beverages packaged in returnable bottles are close substitutes for bever- 
 ages packaged in one-way containers, one would expect at most a small 
 decrease in sales even if consumers treated deposits as part of the price 
 and if the sale price excluding deposit even increased slightly. It is 
 argued below that retail prices for beverages in returnables are not like- 
 ly to increase because of the ban, but even if they did increase as much 
 as ten percent, the predicted decrease in sales would only be 2 percent. 
 Sales of beer and soft drinks have been increasing at rates of 5 to 7 
 
31 
 
 percent per year nationally in recent years as consumers substituted these 
 goods for coffee and other beverages, so the assumption made in this study 
 that a ban would not lead to a decrease in sales is probably a reasonable 
 one. It is more likely that beverage sales would increase after a ban, 
 just as beer sales in Oregon increased after a mandatory deposit regula- 
 tion was imposed. 
 
 Market structure in beverage markets is best described as "monopo- 
 listic competition. " In such markets a firm has some control over the 
 price it charges, unlike the purely competitive firm, but it does not 
 have complete control, like the monopolist. Each firm in such markets 
 strives to differentiate its product by advertising, distinctive and 
 convenient packaging, or other means. At the same time the firm tries 
 to increase its market share by luring away the customers of competing 
 products by imitating their flavors or packages. Some firms are content 
 with lower prices than others and forgo extensive advertising and package 
 variations. It is natural for firms in such markets to believe that 
 the variety of packages and sizes is essential to its sales, for if it 
 restricted itself to a single package type and size in the current mar- 
 ketplace it could expect to lose a major part of its market. 
 
 What is perhaps true for a single firm, however, is probably not 
 true for the market as a whole. Many beverage firms act as if the con- 
 . sumer was buying a container and not the beverage it contains, but if no 
 firm can offer the particular container because of a ban the consumer 
 must buy the beverage in the container that is available or switch to un- 
 packaged beverages. The fears of the industry that a ban will lead to an 
 8 percent decline in sales are absurd [h~\. Even strongly biased consumer 
 surveys indicate only a 2 percent reduction [5]. 
 
32 
 
 These questions cannot be settled by a priori arguments, and the 
 assumption that there would be no change in beverages sales volume the 
 year after a ban is a conservative one considering the steady and rapid 
 recent growth of soft drink and beer sales. 
 
33 
 
 III. Effect of a Ban on Prices 
 It is sometimes agreed that a shift to returnable would lead to 
 increased prices for returnables. This could occur as a result of 
 any of three situations: 
 
 1. a decrease in bottle trippage 
 
 2. higher retailer and producer costs 
 
 3. lower profit margins on returnables than nonreturnables 
 
 ( i . e ., "current subsidy" to returnables by bottlers, brewers, 
 distributors or retailers ) 
 
 4. changes in brand mix 
 
 5. capital losses on equipment 
 
 Lower trippage . If consumers continue to discard containers when 
 only returnable are available, trippage, of course, would decrease 
 and the cost of the returnable system would increase. There is no 
 reason to expect trippage to decrease or that portion of sales which has 
 been in returnables. If anything, trippage should increase with higher 
 desposits and better return facilities. The real question lies in the 
 behavior of persons who have used one-way containers who now must 
 shift to returnables. This is simply a matter of behavior, and behavior 
 can be influenced. Once committed to the returnable system, bottlers 
 and brewers, environmentalists, and agencies concerned with solid 
 waste and litter all have a common interest in making the returnable 
 system work efficiently. The same effort devoted to making the 
 returnable system work as is devoted to cleanup and recycling campaigns 
 would probably make the returnable system quite successful because , 
 with deposits, substantial economic incentive works together with public 
 interest. 
 
3k 
 
 The deposit can be expected to provide incentives for the 
 purchasers to return bottles, and for scavengers and bottle collection 
 drives to gather containers from those consumers who do not wish to 
 return them themselves . 
 
 The consumer sometimes purchases one-way containers because it is 
 the only available container for the brand desired. Many major outlets 
 for beer and soft drinks do not handle returnables at all, so 
 the consumer has no choice, and his action in buying one-way containers 
 does not imply a willingness to pay a premium to discard containers. The 
 frequency with which consumer surveys show approval of bans or mandatory 
 deposits suggests that the "convenience" of the one-way container is 
 a convenience many consumers can do without. 
 
 The effect of a ban is not an obvious decline in trippage as is 
 sometimes argued, but may be no change or even a substantial increase in 
 trippage. 
 
 Higher producer or distributer costs . Major national brand soft 
 drinks and those beers already returnable are not likely to face 
 higher packaging costs. For out-of-state and imported brands, how- 
 ever, this can be a problem. Imported and remotely bottled beers, for 
 instance, would probably choose to use a standard "multibrewer" return- 
 able bottle which would not be returned to that brewer. The distributer 
 would handle redemptions and return these bottles to domestic brewers. 
 If this were done, the imported beers would probably experience a re- 
 duction in price rather than an increase. The return of these bottles 
 would more than compensate the distributor for any increased price to him 
 arising from use of the multibrewer bottle. 
 
35 
 
 Similarly, out-of-state brewers would be forced to handle returns 
 which, with long hauls, would be relatively expensive in terms of 
 transportation costs which are higher for returnables than nonreturn- 
 ables. But returnable beer bottles are cheaper than cans and almost 
 as cheap as one-way bottles. It is hard to see that wholesale prices 
 would have to increase very much even if no bottles were returned. 
 
 If out-of-state and imported beer were shipped in raultibrewer 
 returnables, local brewers would have a supply of used returnables, 
 since distributers would often prefer to channel returns to local 
 brewers . 
 
 Since brewer or distributer trucks must return to breweries 
 anyway, neither the return trip nor loading costs have differential 
 
 cost implication for out-of-state brewers. Nevertheless, transportation 
 costs increase substantially with distance travelled. The growing 
 concentration of brewing in a few major national firms has been 
 permitted by the shift to one-way containers * a forced shift to 
 returnables would benefit local brewers in competition with remote 
 brewers [6], 
 
 Lower markups on returnables . It is sometimes argued that brewer 
 bottles and distributor profit margins are lower on returnables than on 
 nonreturnables and that a shift to returnables would require higher 
 wholesale prices on returnables than are currently charged if profit 
 levels were to be maintained. This is to say that returnables are 
 subsidized. It is difficult to see why brewers should subsidize return- 
 ables which they seem to be so eager to abandon. The lower wholesale 
 prices of returnables probably reflect costs and selective price 
 discrimination. 
 
36 
 
 While good data on markups is lacking because of its confidential 
 nature, it is clear that the cost to the brewer of beer in returnables is 
 somewhat lower than for one-way containers [7], and that the same is 
 true in soft drinks 18]. The differential is smaller at wholesale 
 prices because of higher distribution costs of returnables, and is 
 usually smaller still at retail because of higher handling, sales, and 
 return costs for retailers. 
 
 There is little reason to believe that there is any consistent 
 pattern of subsidizing returnables, since almost everyone in the 
 production and distribution chain except some brewers and bottlers 
 seems eager to get rid of the returnable system as soon as possible. 
 The belief that the returnable system was doomed, which was widely 
 held throughout industry until the past year, hardly contributed to 
 significant research to speed up or economize on returnable bottle 
 lines and equipment. Many bottlers and brewers have simply continued 
 to use fully amortized returnable lines with little improvement while 
 devoting capital expenditures to the rapidly improving "packaging 
 systems of the future" which are almost uniformly one-way systems. 
 With a revival of interest in returnable systems in those states which 
 have instituted beverage container regulations and growing environmental 
 concern elsewhere, it seems likely that substantial improvements in 
 returnable bottle handling systems will be developed. 
 
 Certainly there is little reason to expect that bottlers and 
 brewers will be forced to raise beverage prices because they have 
 shifted to a cheaper packaging system. Some may try to do so, but 
 there seems to be little economic justification for such actions. 
 
37 
 
 Changes in brand mix . If a bottler or brewer faces a substantial 
 rise in cost because of the ban, he may wish to raise his price. Unless 
 sellers are faced with similar situations it is unlikely that the seller 
 who wishes to raise his price will be able to do so without suffering a 
 reduction in sales. Lower sales by a firm are likely to be caused by 
 an increase in price rather than cause an increase in price. At the 
 same time, the national brewers and controlled-brand soft drink firms 
 may face substantially higher costs and be forced to raise prices 
 and lose market shares. If this happens, then in most instances 
 locally brewed and bottled beverages will replace them and average 
 prices for beer and soft drinks as a whole should change very little. 
 If there is a shift from national to local beers , the result may be 
 a reduction in the average price of beer, (since national brands are 
 usually more expensive) . If there is a shift from controlled 
 and local brand soft drinks, the result may be a slight increase in 
 the all-brand average price of soft drinks since national brands in 
 returnables are somewhat higher in price per ounce than controlled 
 brands in cans, but a decrease could occur with a shift from local 
 brands to returnables. 
 
 Overall, then, a change in brand mix is unlikely to change 
 average beer and soft drink prices very much, and either increases or 
 
 decreases could occur. 
 
 Capital losses and costs . Some producers will suffer capital 
 losses from equipment, such as canning lines and can-vending machines 
 rendered useless. These effects will be unevenly distributed, since 
 some bottlers buy canned drinks and brewers with substantial out-of-state 
 business can continue to employ canning lines in this trade. 
 
38 
 
 Only those capital losses which affect bottlers, brewers, and dis- 
 tributers can possibly be passed on, thus the losses of can and glass 
 manufacturers cannot be passed on in beer and soft drink prices. 
 
 Because Minnesota exports much of its beer, canning line capital 
 losses can be expected to be small. 
 
 Can venders can be sold second-hand, out-of-state, or possibly 
 exchanged for bottle venders. Losses are likely to be substantial, how- 
 ever. 
 
 The ability of a firm to pass on capital losses depends on the need 
 of competitors to do so. As a general economic principle, bygones are 
 bygones, and current customers cannot be expected to pay for past mis- 
 judgments. Because the capital losses are unevenly distributed, it is un- 
 likely that they can be passed forward to consumers. Capital costs for 
 new equipment will tend to be largest in those firms which were most com- 
 mitted to one-way container systems, hence to those firms that have the 
 largest capital losses. These costs are ordinarily passed forward as a 
 cost of production, hence should not lead to any increase in price. 
 
 The total effect of all these possible reasons for higher prices 
 appears to be small. The critical influences on Minnesota prices will 
 continue to be local brewers and national-brand soft drinks, and these 
 are the firms which will face the smallest cost effects. It is reason- 
 able to conclude that prices on returnables would change very little in 
 the event of a ban, a situation which has apparently occurred in Oregon 
 with its mandatory deposit law [2]. 
 
39 
 
 IV. Consumer Savings 
 
 If the prices of beverages in returnable containers do not change 
 and the container-size mix does not change as the result of a ban, then 
 consumers would spend less for the same liquid volume of beverages after 
 a ban than they did before. This reduction in spending, termed "con- 
 sumer savings," results from the ban, but should not be interpreted 
 as a pure benefit. Consumers will lose the convenience of the 
 one-way container which at least some of the purchasers were willing 
 to pay for. This loss of convenience is one of the social costs of a 
 ban. At the same time, the convenience of the one-way container to the 
 individual consumer entails social costs external to the consumer in 
 the solid waste and litter costs associated with and arising from 
 beverage consumption. These include not only the costs of collection 
 and disposal of solid waste and litter by public agencies but by 
 individuals who must dispose of litter and solid waste on private 
 property. In addition, there is the general social cost of litter 
 which is suffered by everyone who contemplates it. Beautiful sights 
 are marred by litter, and since people will pay substantial amounts 
 of money to see beauty, they would presumably pay something to be free 
 of litter. It is this widely held public attitude that justifies public 
 litter collection expense. The net social benefit of a ban is the 
 algebraic sum of the costs and benefits arising from the ban, and it is 
 not to be confused with consumer savings which may be larger or smaller, 
 
 In the preceeding sections of this paper it has been argued that 
 a ban would cause little or no change in the price and volume of 
 beverages, hence consumer savings can be expected to be positive. In 
 this section consumer savings are based on late 1972 prices and the 
 
1+0 
 
 estimated volume of beverages sold in 1972. 
 
 The prices were collected in a survey in the Minneapolis-St . Paul 
 area in December 1972 and are described in Appendix A. Beer sales of 1972 
 are stimated from official state data and the distribution package size 
 and type are estimated from various national industry data. Soft 
 drink sales of 1972 are estimated from national data from various sources 
 and from Minnesota's 1967 share of national shipments. Sales and 
 package data are described in Appendix B. Detailed package-mix 
 data are lacking, so that many detailed assumptions have been made 
 in preparing the estimates. The volume of liquid beverages sold in 
 containers has been estimated in 12 ounce equivalents, but the estimated 
 price differentials reflect the estimated size mix of containers and 
 is not based purely on the price differentials of 12 ounce containers. 
 
 Soft drinks . The consumer savings from a shift to returnables 
 depends strongly on the postban container size pattern. In the 12 
 ounce size, according to Appendix A, the per ounce price in cans is 
 1.4c and the comparable 10-12 ounce returnable bottle price is 
 1.26c, while in the 26-32 ounce size the price in one-way bottles is 
 1.2c per ounce compared to .85c per ounce in returnables. If all 
 sales in one-way containers were in the large sizes, consumer costs 
 would decrease by 29 per cent, while if all sales were in 12 ounce 
 one-way containers costs would decrease by 10 per cent. It is 
 assumed that two-thirds of soft-drink sales are in the smaller sizes 
 for which the 10 per cent reduction applies, and one-third of sales 
 are in the larger sizes for which the 29 per cent reduction applies. 
 
1+1 
 
 This is a somewhat larger proportion for the large sizes than is 
 found in the 1967 data on soft-drink shipments by container size for 
 Minnesota [9, p. 194], but the shift is assumed only to affect the 
 approximately 50 percent of soft-drink sales which are for home 
 consumption [10, p. 30]. 
 
 It is also assumed that three-fourths of can sales are in 
 national brands, for which the 10 percent consumer cost reduction 
 would apply, and that three-fourths of one-way bottle sales are 
 national brands, for which the 29 percent consumer cost reduction 
 would apply. No cost reduction is assumed for the one- fourth of 
 sales in cans and one-way bottles assumed to be accounted for by 
 local and controlled brands. It is assumed that all returnable 
 sales are in national brands. These figures are set out in Table 10 
 and the estimated soft drink sales for 1972 with and without a ban 
 on returnables are presented. Soft irink sales are estimated to be 
 $40 million without a ban on one-way containers, and $36.12 million 
 with a ban, indicating consumer savings from a ban of almost $4 
 million for soft drinks. 
 
 This estimate of $4 million in consumer savings does not assume 
 any savings for consumers of local or controlled-brand soft drinks, 
 nor does it assume any savings except for the home market. There may 
 be additional savings for customers of vender and restaurant and 
 other on-premise sales , but these are assumed not to be passed on to 
 the consumer". 
 
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 Beer . Consumer savings from a ban on one-way beer containers 
 are somewhat more difficult to estimate than for soft drinks. One of the 
 consequences of a ban on one-way beer containers is likely to be sign- 
 ificant shift from out-of-state beers to Minnesota beers, reversing the 
 trend toward purchase of out-of-state beers. In 1972, according to data 
 from Minnesota Liquor Control Department, 8l percent of 3*2 percent beer 
 was produced in Minnesota, compared to 83 percent in 1971 and Qk percent 
 in 1970* I n 1972, 65 percent of strong beer sold in Minnesota was pro- 
 duced in Minnesota, compared with 66 percent in 1971 a nd 68 percent in 
 1970- The somewhat higher transportation costs of the returnable system 
 for out-of-state brewers may lead some of them to abandon or deemphasize 
 the Minnesota market, and the price differential between brewed and out- 
 of-state beers might increase over the current level of about 1 cent a 
 bottle. If so, then the return of consumers to Minnesota beers could be 
 significant and consumer savings might be substantial. This would in- 
 dicate an increase in the price of out-of-state beer, however, so it is 
 assumed that there would be no net consumer savings from the expected 
 shift to Minnesota beers. 
 
 It is assumed for purposes of analysis that the shift from one-way 
 to returnable containers would affect prices of two- thirds of the market 
 and that the remaining one third will retain any price saving and not pass 
 it on to the consumer. Thus in Table 11, the package mix for U-95 billion 
 ounces of beer is estimated. It is assumed that the distribution of 
 container types corresponds to the national pattern reported in Appendix 
 B, and that the proportion of local beers to the total is the same for all 
 container types and sizes. Data are lacking on the proportion of the mar- 
 ket made up of premium and regular beers, and no price is available for 
 
kk 
 
 Table 11. 
 Estimated Sales of Beer by Volume In Minnesota, 1972 
 
 Volume in billions of ounces 
 
 
 Total 
 
 Returnable 
 
 NR bottles 
 
 Cans 
 
 Strong beer 
 
 3.564 
 
 .916 
 
 .728 
 
 1.920 
 
 Local 
 
 2.317 
 
 .595 
 
 .473 
 
 1.248 
 
 Premium 
 
 1.544 
 
 .397 
 
 .316 
 
 .832 
 
 Regular 
 
 .733 
 
 .198 
 
 .158 
 
 .416 
 
 Out-of-state 
 
 1.247 
 
 .321 
 
 .255 
 
 .672 
 
 Premium 
 
 .831 
 
 .214 
 
 .170 
 
 .448 
 
 Regular 
 
 .416 
 
 .107 
 
 .085 
 
 .224 
 
 3.2 beer 
 
 1.386 
 
 — 
 
 .381 
 
 1.005 
 
 Local 
 
 1.123 
 
 — 
 
 .309 
 
 .814 
 
 Premium 
 
 .748 
 
 — 
 
 .206 
 
 .542 
 
 Regular 
 
 .375 
 
 — 
 
 .103 
 
 .272 
 
 Out-of-state 
 
 .263 
 
 — 
 
 .072 
 
 .191 
 
 Premium 
 
 .175 
 
 — 
 
 .048 
 
 .127 
 
 Regular 
 
 .088 
 
 — 
 
 .024 
 
 .054 
 
 Source: Appendix B. 
 
h5 
 
 returnable s of regular beers in 3-2 beer, so it is assumed that all 3.2 
 beer has been sold in one-way containers and that returnables of regular 
 3.2 beer will cost the same as returnables of strong beer after a ban. 
 It is assumed that one-third of total strong and of total 3.2 beer is 
 regular beer. Using prices derived from Appendix A, total sales implied 
 by the estimated package mix is given in Table 12. Estimated total beer 
 sales in the current estimated package mix is about $87 million. Using 
 returnable prices, but keeping the mix of 3-2 to strong, local to out-of- 
 state, and premium to regular as before, estimated beer sales with a ban 
 on returnables is about $72 million, so that estimated consumer savings 
 from a ban on one-way containers for beer would be something over $14 
 million. 
 
 The estimated consumer savings of $lU million would be reduced if 
 the prices of returnables increased above current levels. Some increase 
 might be expected since case prices were the only returnable prices 
 available and six-pack or twelve-pack returnable prices might be some- 
 what higher. Savings might be somewhat greater than estimated if there 
 was a significant shift to local beer and if, as might be expected, 3*2 
 beer in returnables had a lower price than strong beer in returnables. 
 
ke 
 
 Table 12, 
 
 Estimated Beer Sales, 1972 and Postban, by Container Type 
 
 ($ million ) 
 1972 Sales 
 
 Total Returnable NR bottle Cans 
 
 Strong beer 
 
 
 
 Local 
 
 
 Premium 
 
 29, 
 
 ,60 
 
 Regular 
 
 10, 
 
 ,65 
 
 Out-of-state 
 
 
 
 Premium 
 
 16, 
 
 ,20 
 
 Regular 
 
 5, 
 
 ,74 
 
 3.2 beer 
 
 
 
 Local 
 
 
 Premium 
 
 14, 
 
 ,70 
 
 Regular 
 
 5, 
 
 ,65 
 
 Out-of-state 
 
 
 
 Premium 
 
 3, 
 
 ,48 
 
 Regular 
 
 1, 
 
 ,33 
 
 6.75 
 1.96 
 
 3.74 
 1.06 
 
 6.13 
 2.37 
 
 3.37 
 1.28 
 
 16.72 
 6.32 
 
 9.09 
 3.40 
 
 4.08 
 
 10.62 
 
 1.54 
 
 4.11 
 
 .99 
 
 2.49 
 
 .36 
 
 .97 
 
 Estimated 
 
 sales Consumer 
 
 after ban Savings 
 
 26.25 
 7.65 
 
 14.54 
 4.12 
 
 12.72 
 3.71 
 
 3.06 
 .87 
 
 3.35 
 
 3.00 
 
 1.66 
 1.62 
 
 1.98 
 
 1.94 
 
 .42 
 .46 
 
 Source: Derived from Table 11 and Appendix A, Table A-2. 
 
hi 
 
 V. Employment Effects 
 
 The savings to consumers of approximately $18 million is substantial, 
 It arises, of course, from the lower prices charged by bottlers and 
 brewers for beverages in returnables, and, ultimately, from the lower 
 packaging costs faced by bottlers and brewers with a shift to a 
 completely returnable system. No change in unit costs or prices of 
 returnables has been made, and there is no assumption that distributers 
 or retailers gross margins decrease. To the contrary, it is to be 
 expected that both distributers and retailers will have substantially 
 higher margins (although not higher percentage markups on returnables) 
 than they had before the ban. The higher gross margins of distributers' 
 and retailers' will be used in part to pay the higher costs of handling 
 a returnable system, and there is no way to tell if total profits of 
 distributers and retailers on beverages will be increased or decreased 
 by the shift to returnables. The loss of sales of packaging materials 
 to bottlers and brewers will be much greater than the consumer savings 
 because of the higher unit costs of handling in distribution associated 
 with use of the returnable system. 
 
 The consumer savings of $18 million will probably be largely 
 diverted to spending on goods other than beverages and will generate 
 positive direct and indirect employment effects, while the shift to 
 beverage sales in returnables will generate additional direct employment 
 effects in bottling and brewing, distribution, and retailing. The 
 decline in purchases of packaging materials by bottlers and brewers 
 will generate negative direct and indirect employment effects. 
 
1+8 
 
 It is impossible to estimate the employment effects directly 
 from available data. Rather it seems best to estimate the economic 
 effects in terms of bottling and distribution costs and the reduction 
 in packaging sales and then to derive the employment effects from 
 the implicit labor requirements for the changes in economic activities. 
 
 The first step in the analysis is to estimate the costs to 
 retailers of handling the additional load of returnables. One 
 available estimate of the labor costs of handling returnable bottles 
 indicates a requirement of 2.8335 man-hours of labor per 1,000 bottles[ll^ 
 It is estimated in Table 10 that a ban would require 2.2 billion 
 
 additional ounces of soft drinks in returnables. Assuming a 16 ounce 
 average container size, this is 137.5 million additional bottles 
 which would require 389,606 additional man-hours of work at retail 
 stores. Assuming 2,000 hours a year, this is 195 full-time equivalent 
 workers . 
 
 From Table 11 it is estimated that U.03^ billion additional ounces 
 of beer would have to be handled in returnables. Assuming a 12 ounce 
 average bottle, this is equivalent to 336.2 million bottles, indicating 
 a requirement for 952,528 man hours of labor. Assuming 2>000 hours a 
 year, this implies need for 476 additional full-time equivalent workers 
 in retail stores. 
 
 The next stage in distribution is at the wholesale distributer 
 level. The function of moving beer from the brewer to the retailer is 
 often handled in local beers by brewery employees and is usually 
 handled for out-of-state beers by independent wholesale beer distributers. 
 
h9 
 
 Using the estimates of cases of beer distributed per employee 
 from Table 13 based on the estimates of the Research Triangle Institute [3], 
 and assuming that all locally brewed beer is distributed by brewery 
 employees and all out-of-state beer is distributed by distributer 
 employees, it is estimated that brewers will require 85 additional 
 workers to distribute the 4.072 million cases of beer sold before 
 the ban in one-way bottles, 262 additional workers to distribute 
 the 10.74 million cases sold in cans. Wholesale distributers will 
 require 29 additional workers for the 1.702 million cases of out-of-state 
 beer sold in one-way bottles and 107 additional workers for the 
 4.495 million cases sold in cans. Thus an estimated total of 
 483 additional workers will be required in distribution of beer. 
 
 Soft drink bottlers will require 203 additional workers in 
 distribution to handle the estimated 8.33 million additional 
 cases of returnables which were formerly in cans, and 145 additional 
 workers to handle the 6.94 million cases formerly in one-way bottles. 
 Thus 348 additional workers will be required by bottlers in the 
 distribution of soft drinks. 
 
 The next stage is the bottling of beer and soft drinks. Labor 
 requirements are somewhat higher for returnables than for one-way 
 containers. Labor costs for packaging are estimated at 30.77c a 
 case for returnables, 19.27c a case for one-way bottles, and 8.82c 
 a case for cans [7]. Estimating labor cost for a line worker at $4 
 an hour, leads to estimates of .0769 man-hours per case of 
 
50 
 
 Table 13- 
 
 Cases Distributed Per Man-Year of Employment 
 Soft Drink Bottlers, Brewers and Beer 
 Distributers 
 
 Cases distributed per man-year 
 Returnables NR Bo t tles Cans 
 Beer distributers 16,710 25,350 27,750 
 
 Brewers 16,740 25,390 27,770 
 
 Soft drink bottlers 16,300 24,720 27,040 
 
 Source: Tayler H. Bingham and Paul F. Mulligan, An Analysis of the 
 
 Beverage Container Problem with Recommendations for Government 
 Policy , pp. A-106, A-108 (Research Triangle Park, North Caro- 
 lina: Research Triangle Institute, 1972). 
 
51 
 
 returnables, 0.0482 man-hours per case of one-way bottles, and 0.022 
 man-hours per case of cans. This indicates that local brewers will 
 require 58 additional line workers for the beer formerly in one-way 
 bottles and 293 line workers for the beer formerly in cans. This 
 additional employment is expected to occur in Minnesota. In addition, 
 out-of-state brewers will require 24 workers for the beer formerly 
 in one-way bottles and 123 workers for the beer formerly in cans. 
 
 Soft drink bottlers will require 100 additional workers for 
 the soft drinks formerly in one-way bottles and 227 additional 
 workers for the soft drinks formerly in cans. 
 
 The remaining employment effects are the direct and indirect 
 effects resulting from the reduction in purchases of packaging 
 materials. Most of these costs arise in can and bottle production, 
 and the small effects in miscellaneous industries including the 
 production of labels, adhesives, and detergents are ignored here. 
 Koch estimates that costs of crowns, cartons, and glass for beer 
 in one-way bottles is 75.33c per case. This amounts to $4.35 million 
 for the one-way bottles replaced by returnables [7] . He also 
 estimates the cost of cans and lids for beer at 98.23c per case, or 
 $14.96 million for the beer in cans replaced by returnables. Using 
 the same figures for soft drinks, a reduction in purchases of crowns, 
 cartons, and glass of $5.23 million for soft drinks formerly in one-way 
 bottles and a reduction of $8.18 million for soft drinks formerly 
 in cans is obtained. 
 
 Aggregate reductions in packaging purchases for cans and lids 
 is about $23.8 million and for glass packaging about $9.6 million. 
 
52 
 
 The shift of beverages to returnables will entail costs for 
 returnable beverage bottles. There will be an important impact 
 effect in glass container manufacture as "bottlers and brewers build 
 up their inventories and float, but this is not examined. The process 
 will be important in cushioning the employment effects in the glass 
 container industry. Assuming that a returnable beer bottle costs 
 3.5c and a returnable soft-drink bottle costs 10c and that trippage 
 is twenty for each of these containers, the glass costs of k.2 cents per 
 case of beer leads to total costs of $840,000 and the glass costs of 
 11.4c a case for soft drinks leads to glass costs of $1,741,000 for 
 containers to replace the one-way bottles and cans. Thus approximately 
 $2.6 million a year of returnable container losses changes the 
 reduction in glass spending from the $9.6 million estimated above 
 to $7 million. Thus the net reduction in container costs is estimated 
 to be $30.8 million. 
 
 To estimate the direct and indirect employment effects of this 
 reduction in purchases of cans and bottles by the beverage industries 
 input-output analysis is used. A similar analysis has already been 
 carried out in the Illinois study [1], and the results of that study 
 can be adapted for use here. The estimated reduction in can spending 
 in Illinois was $88 million, so the $23.8 million reduction in 
 Minnesota will lead to employment effects that are 27 per cent as 
 large as those estimated for Illinois. The estimated reduction in 
 glass purchases of $7 million in Minnesota is 54.26 per cent of the 
 estimated Illinois reduction of $12.8 million. The direct and indirect 
 
53 
 
 employment effects of the reduction in cans and bottles are given in 
 
 Table lU. 
 
 Summary of the direct and indirect employment effects is as follows: 
 
 Reductions in employment 
 
 Metal cans 433 
 
 Glass containers 301 
 
 Indirect effects from metal cans 806 
 
 Indirect effects from glass containers 118 
 
 Total reductions 1,658 
 Increases in employment 
 
 Retail trade 671 
 
 Beer distribution 483 
 
 Soft-drink distribution 348 
 
 Beer bottling 498 
 
 Soft-drink bottling 327 
 
 Total increases 2,327 
 
 Net increase in employment 669 
 
 These estimates are not complete, but they include most of 
 the major effects. One specific omission is a reduction in solid 
 waste handling and litter collection which might run to 200 or 300 
 jobs. In addition to these measured effects in the directly 
 concerned industries consumers can be expected to spend the $18 million 
 consumer savings. If they spend some of this on more beverages, 
 
5h 
 
 Table 1^. 
 
 Estimated Direct and Indirect Employment Effects 
 of Reduction in Can and Bottle Purchases 
 as a Result of the Ban, Minnesota 
 
 Input-output 
 Industry (SIC Code) industry 
 
 Glass containers (322 ) 
 Metal cans (3411) 
 
 Coal mining (11, 12) 7.0 
 
 Petroleum & gas(1311,2) 8.0 
 
 Stone fie clay (141, etc) 9.0 
 
 Paper mills (2611) 24.02 
 
 Paperboard mills (2631) 24.03 
 
 Paperboard ctnrs (265) 25.00 
 
 Comm. printing (2751,2) 26.05 
 
 Ind'l chemicals (281) 27.01 
 
 Paints (2851) 30.00 
 
 Petr. ref. (2911,299) 31.01 
 
 Abrasive prod. (3291) 36.16 
 
 Basic steel (331) 37.01 
 
 Prim, aluminum (3334) 38.04 
 
 Alum, rolling (3352) 38.08 
 
 Railroads (40,474) 65.01 
 
 Motor freight(42,473) 65.03 
 
 Water transport (44) 65.04 
 Elec. util. (491, pt. 493)68. 01 
 
 Gas util. (492, pt. 493) 68.02 
 
 Wholesale trade (50) 69.01 
 
 Credit agencies (61,67) 70.01 
 
 Misc. bus. serv. (73,7694) 73.01 
 
 Advertising (731) 73.02 
 
 Employment reduction from 
 Cans Bottles 
 
 ) 
 
 433 
 23 
 
 4 
 
 3 
 
 23 
 
 61 
 
 17 
 
 18 
 
 4 
 
 379 
 
 3 
 12 
 62 
 39 
 16 
 
 7 
 
 6 
 89 
 
 5 
 33 
 
 301 
 
 8 
 7 
 
 2 
 29 
 
 21 
 
 2 
 
 4 
 
 10 
 
 3 
 6 
 16 
 2 
 8 
 
 Source: 
 
 Derived from Hugh Folk, Employment Effects of the Mandatory 
 Deposit Regulations , tables 8 and 9 (Springfield and Chicago: 
 Illinois Institute for Environmental Quality. Document 72-1. 
 1972). 
 
55 
 
 the glass reductions will be smaller and the increases in employment in 
 beverage production and distribution will be larger. If the $18 million 
 in consumer savings is spent on other commodities and services, it should 
 have a direct and indirect employment effect of creating perhaps 1,200 
 jobs. This suggests that the total direct and indirect employment effects 
 resulting from a ban on one-way containers could amount to an increase 
 in employment of about 1,500 to 2,000 jobs. 
 
 The increase in employment arises from the labor-intensive charac- 
 ter of the returnable beverage container system compared with the one-way 
 systems, but ultimately the increase in employment arises from the fact 
 that wages are generally lower in the industries which are positively 
 affected than in the industries which are negatively affected. 
 
 There is no good way to identify the proportion of the increases 
 and decreases which will occur within Minnesota. It is not debatable, 
 however, that most of the increases in retail trade, distribution, and 
 bottling and brewing that occur will occur in Minnesota. It is likely 
 that most of the reductions in metal can and glass container manufacture 
 will also occur in Minnesota, but it should be remembered that Minnesota 
 is an important exporter of beer and that much of the exported beer going 
 to other states will continue to be in one-way containers. The indirect 
 reductions will probably be much less concentrated in Minnesota than are 
 the direct reductions. 
 
56 
 
 VI. Summary and Conclusions 
 
 A ban on one-way containers can be expected to have significant 
 effects on employment in industries involved in the production and dis- 
 tribution of beer and soft drinks. It does not seem likely that a ban 
 would lead to a decrease in total sales of beer or soft drinks or to in- 
 creases in the prices of beverages in returnable bottles. The major 
 effect of a ban would be to shift consumer buying from beverages in one- 
 way containers to similar beverages in returnable s. Since beverages in 
 returnable s are usually priced somewhat lower than the same brands in 
 one-way containers, the shift would lead to a substantial cost saving 
 for consumers, amounting to an estimated $18 million. 
 
 The substitution of returnable containers for one-way containers 
 would probably work to the advantage of local brewers and local nationally 
 franchised brands and to the disadvantage of out-of-state brewers and 
 the controlled and local brand soft drink bottlers. 
 
 Significant employment decreases in can and bottle manufacture and 
 in those industries which supply inputs to the can and bottle iudustries 
 would result from the reduction in sales of containers to brewers and 
 bottlers. Increases in employment in retail trade and in soft drink and 
 beer production and distribution would result from the higher costs of 
 bottling and transporting beverages in returnable containers. Aggregate 
 reductions in employment would be about 1,658 jobs and aggregate increases 
 in related industries would be about 2,327 jobs. In addition, consumer 
 spending of the estimated $18 million of consumer savings would generate 
 about 1,200 addition jobs, suggesting a net increase in employment of 
 
57 
 
 1,500 to 2,00 jobs. 
 
 Most of the increases in employment would occur in Minnesota, while 
 many of the decreases, especially in indirectly related industries would 
 occur outside of the state. 
 
 This study does not purpose to be a complete study of the costs and 
 "benefits of a ban on one-way containers. It does show, however, that the 
 employment effects in net balance are not unfavorable. It must be recog- 
 nized that the employment reductions are concentrated in the metal can 
 and glass container industries. If a ban is adopted, a lead time of a 
 year would be helpful in cushioning the employment impact of the ban and 
 in permitting bottlers, brewers, and retailers to prepare for the changes 
 which will take place. 
 
 The occurrence of employment reductions concentrated in particular 
 industries does not constitute a strong argument against legislation 
 which is desirable on other grounds. The employment in the container 
 industries is, in a very real sense, a substitute for employment in the 
 beverage production and distribution industries which once were engaged 
 in operating the returnable system. Changes in the industrial distribu- 
 tion of employment are the normal consequence of economic growth and change, 
 Changes such as those which will occur with the adoption of a ban on one- 
 way containers can be readily absorbed in the economy as long as it 
 remains vigorous and expanding. 
 
58 
 
 REFERENCES 
 
 American Can Company. Carbonated Beverages in the United States -- His- 
 torical Review . 1972. 
 
 American Can Company. A History of Packaged Beer and Its Market in the 
 United States. New York, 1969. 
 
 Beverage Industry Annual Manual. 1972-73' 
 
 Bingham, Taylor H. and Mulligan, Paul F. An Analysis of the Beverage 
 Container Problem with Recommendations for Governmental Policy. Research 
 Triangle Park, North Carolina: Research Triangle Institute, 1972. 
 
 Booz-Allen and Hamilton, Inc. Study of Distribution Practices in the Soft 
 Drink Industry , 2 vols. Washington: National Soft Drink Association, 
 196^ 
 
 Bottle Survey '71» A California Supermarket Report on the Cost of Hand- 
 ling Returnable Soft Drink Bottles. LaHabra, California: Alpha Beta 
 Acme Markets, 1971- 
 
 Edwards, Tom. "Oregon Beer Sales Have Not Suffered Under New Deposit 
 Law" Peoria Journal Star , January 5, 1973; PP- A- 11. 
 
 Folk, Hugh. Employment Effects of the Mandatory Deposit Regulations . 
 Springfield and Chicago: Illinois Institute for Environmental Quality 
 Document 72-1, 1972. 
 
 Folk, Hugh. U.S., Senate, Committee on Commerce, Statement in Hearings 
 before the Subcommittee on the Environment , March o^ 10~j 13/1972 , PP' 
 298-301. 
 
 Koch, Robert H. "Bottling Efficiency -- A Myth? " Brewers Digest, 
 January 1970' 
 
 Midwest Research Institute. The National Economic Impact of a Ban on 
 Nonrefillable Beverage Containers. Kansas City, Missouri: Midwest 
 Research Institute, 1971- 
 
 United States Brewers Association, Inc. The Brewing Industry in the 
 United States. Washington, D.C.: Brewers Almanac, 1970- 
 
59 
 
 Appendix A 
 Minneapolis -St. Paul Beverage Price Survey 
 
 Prices are needed to carry out the consumer cost analysis. The 
 limited time available for the study and limited resources restricted 
 the price survey to the Minneapolis- St. Paul area. Package prices for 
 major national brands (Coca-Cola, Pepsi Cola, and Seven-Up), local brands 
 (Gold Medal and Tom Moore) and a controlled brand (Brimfull) were collected 
 on the 26th and 27th of December by Ms. Jacquelyn M. Burke, Research 
 Analyst, Minesota Pollution Control Agency, according to instructions of 
 the author. An independent supermarket near the university campus an 
 inner city chain supermarket, a chain supermarket in a middle-class 
 suburb, a middle-class suburban stop-and-shop, a low-income neighborhood 
 grocery, and a liquor store in a middle-class suburb were surveyed. 
 
 For the beer sample, strong beer was priced in a middle-class 
 suburban liquor store, an inner city liquor store, and a liquor store in 
 a low-income area. The sample for 3*2 beer included a neighborhood 
 grocery in a low income area, a grocery store near the university, and 
 a middle-class suburban stop and shop. Prices were collected for two 
 local premium brands (Hamm's and Grain Belt), two national premium 
 brands (Budweiser and Schlitz), and a local regular beer (Buckhorn). 
 
 Soft drink prices . Simple averages of prices by container type, 
 brand type, and container size were calculated and are given in terms 
 of price per ounce in Table A-l. 
 
6o 
 
 Table A-l 
 
 Average Price of Soft Drink Per Ounce, 
 by Size and Container Type 
 
 Container size 
 
 64-48 
 
 26-32 
 
 16 
 
 10-12 6^-7 
 
 Returnable 
 
 
 
 
 
 National (a) 
 
 - 
 
 .85 
 
 1.02 
 
 1.26 1.80 
 
 Nonreturnable 
 
 
 
 
 
 National (a) 
 
 1.10 
 
 1.20 
 
 - 
 
 1.40(d) 
 
 Local (b) 
 
 1.08 
 
 .86 
 
 - 
 
 - 
 
 Controlled (c) 
 
 — 
 
 - 
 
 - 
 
 •75(d) - 
 
 a. Coca-Cola, Pepsi Cola, 7-Up 
 
 b. Gold Medal, Tom Moore 
 
 c. Brimfull 
 
 d. Can 
 
61 
 
 Beer prices. Beer prices were averaged by brand type, beer type, 
 and container size, and average prices per ounce obtained are presented 
 in Table A-2. 
 
 Table A-2 
 
 Price of Beer Per Ounce, 
 by Type and Container 
 
 Minneapolis - St. Paul, December, 1972 
 (price in cents per ounce) 
 
 Container type Returnable Nonreturnable bottle Can 
 Container size 12 32 12 12 16 
 
 Strong beer 
 
 
 
 Local premium 
 
 1.70 
 
 1.86 
 
 National 
 
 1.75 
 
 1.85 
 
 Local regular 
 
 .99 
 
 — 
 
 3.2 Beer 
 
 
 
 Local premium 
 
 — 
 
 1.78 
 
 National 
 
 — 
 
 1.84 
 
 Local regular 
 
 — 
 
 — 
 
 1.94 2.01 1.84 
 1.98 2.03 1.86 
 1.52 — 
 
 1.98 1.96 1.81 
 2.07 1.96 1.84 
 1.51 
 
62 
 
 Appendix B 
 
 Estimated 1972 Minnesota Beverage Sales by Container 
 
 In the first half of 1972, according to the Minnesota Liquor 
 Control Department, 1,194,944 31 gallon barrels of beer were taxed for 
 sale in Minnesota. It is assumed that 1972 total sales will be twice 
 this level, or 2,389,888 barrels. Assuming that the same proportion 
 of 1972 Minnesota beer sales will be in packages as the 1969 proportion 
 of packaged beer to total production in Minesota [12, Table 9], or 78.3 
 percent, 7-425 billion ounces of packaged beer will be sold. 
 
 Assuming that the 1972 distribution of beer packages will be that 
 estimated for the United States for 1972 by the Beverage Industry Annual 
 Manual , 1972-73, Table 2, p. 23, or 59. 1 percent in cans, 22. 4 percent 
 in one-way bottles, and 18.5 percent in returnable bottles, the estimated 
 number of ounces of beer sold will be 4.388 billion in cans, I.663 billion 
 in one-way bottles, and I.663 billion in one-way bottles, and 1-374 
 billion in returnable bottles. 
 
 In 1972, an estimated 47 billion 12 ounce equivalent containers 
 of soft drinks were sold, according to the 1972-73 Beverage Industry 
 Annual Manual , Table 1, p. 23, of which 16.4 billion were in cans, 13.6 
 billion in one-way bottles, and 17 billion in returnable bottles. As- 
 suming that Minnesota's share of 1972 sales were the same as its share of 
 bottled soft drink shipments in the 1967 Census of Manufactures, or 1.22 
 percent, and that the package mix was the same in Minnesota as nationally, 
 there were an estimated 200 million cans, 166 million one-way bottles, 
 and 207 million returnable bottles of soft drinks sold in Minnesota. 
 
 This is equivalent to 2.4 billion ounces in cans, 2 billion ounces 
 in one-way bottles, and 2.5 billion ounces in returnable bottles. 
 
IDLIOGRAPHIC DATA 
 HEET 
 
 I. Kcpoii No. 
 
 UIUC-CAC-DN-73-73 
 
 3. Recipient's Accession No. 
 
 1 ii U .in J .s,il>t tik' 
 
 TWO PAPERS ON THE EFFECTS OF MANDATORY DEPOSITS ON 
 BEVERAGE CONTAINERS 
 
 5- Report Date 
 
 January "1973 
 
 Author(s) 
 
 Hugh Folk 
 
 8. Performing Organization Kept. 
 
 No - CAC-73 
 
 Performing Organization Name and Address 
 
 Center for Advanced Computation 
 University of Illinois at Urb ana -Champaign 
 Urbana, Illinois 61801 
 
 10. Project/ Task/Work Unit No. 
 
 11. Contract/Grant No. 
 
 . Sponsoring Organization Name and Address 
 
 Llmois Institute for Environmental 
 
 iality 
 
 l>9 W. Washington St. 
 dicago, Illinois 60606 
 
 Minnesota Pollution Control 
 
 Agency 
 
 717 S.E. Delaware St. 
 
 St. Paul, Minn. 
 
 13. Type ol Report Si Period 
 Covered 
 
 Research 
 
 u. 
 
 '. Supplementary Notes 
 
 Abstracts 
 
 Paper 1: The regulation requiring a five cent deposit on all beverage con- 
 tainers proposed by the Solid Waste Management Task Force of the Illinois Institute 
 for Environmental Quality for adoption by the Illinois Pollution Control Board can 
 be expected to have significant employment effects. This report attempts to ident- 
 ify and measure these employment efects using straight-forward economic impact 
 analysis. Paper 2: This report attempts to identify the economic effects of a ban 
 on nonreturnable containers and the measure the empact of a ban on consumer costs 
 and employment in Minnesota. Most of the conclusions reached in this study would 
 also apply to a mandatory deposit law which did not ban returnables. The Illinois 
 analysis was based on the assumption that mandatory deposits would lead to an 
 essentially complete shift from nonreturnable s to returnables. This is open to 
 argument, and it can be expected that nonreturnable s would persist in some sales 
 situations despite the imposition of a mandatory deposit. 
 
 . Key Words and Document Analysis. 17o. Descriptors 
 
 Beverage industry 
 Nonreturnable s 
 Litter 
 Solid waste 
 Mandatroy deposit 
 
 1b. Identif ieis/Opcn-I'ndcd Terms 
 
 'c. COSATI I ie Id/Group 
 
 Avai!.u,,iny Statement No restriction on distribution. 
 Available from National Technical Information 
 Service, Springfield, Virginia 22151 
 
 19. V 1 uriiy Class (1 In 
 Repi-rt) 
 
 '7-'.l, A ^ll HP 
 
 20. Si. ut it y I la-.'. ( 1 Ins 
 Pare 
 
 r\< i v>HM D 
 
 21. No. ot Paucs 
 
 Co 
 
 22. Price 
 
 KIM n I is- «'j i ■> i. v . J- /. 
 
 1 HIS FORM MAY Ml! Kl PRODIX IP 
 
 'JSCOMM-OC 14^3-MjJ