It haf been assumed that it comes from "mung," a cheap cloth. But no direct link has been found. The word has also been spelled as "mongo."
Recently, "mungo" has been spotted from the 1930s. It has been used in Brooklyn. I have guessed that it might be a joke on the colorful Brooklyn Dodger pitcher of the 1930s, Van Lingle Mungo. But that remains just a guess.
mongo n. material or goods salvaged from items intended for disposal.
English. NYC. Slang. United States. New evidence from the unpublished Lexicon of Trade Jargon, compiled by the Works Progress Administration, has a form of this word from before 1938: mungo, referring to the person who salvages discarded items, rather than the things being salvaged. This term appears to be specific to New York City.
1984 James Brooke New York Times (Sept. 10) "Sanitation Art Showings Brighten Workers' Image" p. B4: Other exhibits at the gallery were a 1,500-square-foot transparent map showing the locations of Sanitation Department offices; three piles of televisions on which videotapes of sanitation workers were shown, and an old, department-section office furnished in "mongo," discarded furniture salvaged by sanitation men.
30 May 1963, New York Times, pg. 14:
A Sanitation foreman found $6,000 worth of mungo yesterday. Mungo is the sanitation workers' term for salvageable items found in refuse.
2 January 1972, New York Times, pg. 13:
Among the scuba enthusiasts are a group known as Mungo divers, whom Mr. Miranda described as seagoing scavengers who search for copper and brass to sell to junk dealers.
24 May 1974, New York Times, pg. 29:
The men said that one reason the bulk collection was so meager was that "mungo-pickers" (slang for scavengers) had carted off the good furniture the night before.
21 July 1977, New York Times, pg. 50:
Jason Martinelli's idea of a night on the town is to jump into his
mungo-picking outfit, jump into a commodious refuse bin, and just root around in there collecting "fantastic, free, found material" with which to decorate his apartment. In a word, garbage. To Mr. Martinelli and others in the city's subculture of scavengers the term is "mungo," however and the picking is easy-- once you know the rules.
2 June 1984, New York Times, pg. 27:
Other furnishings are of the "mungo" variety, a term used by sanitation workers for objects retrieved from the trash.