Under current policy, hotel and airport workers are already on their way to a $30 an hour wage floor ($38.85 if you add in a mandatory additional stipend for health coverage). Good for those who keep their jobs, but not for those who will lose them, or will never be hired because of the rising cost of labor.
Not so good for the employers who will have to pay out the steep wage, either. Some have said they could be forced to close their businesses.
Before the ordinance was signed by Los Angeles Mayor Karen Bass, a number of hotels that had agreed to arrange for discounted rooms for the 2028 Olympic Games said they might have to back out of the deal because they will be unable to absorb increased labor expenses. Kara Bartelt, general manager of downtown boutique hotel Hoxton, warned that “if the city continues down this path and only listens to one side of the equation, there will be hotel closures, lost jobs and lost opportunities for all.” A spokesperson for a business alliance sees an “economic crisis” ahead for the tourism sector if the higher wage is imposed.
Employers are pushing back with more than rhetoric. Two days after Bass signed the ordinance, the Los Angeles Alliance for Tourism, Jobs and Progress, made up of hotels, airlines, airport concessionaires and business groups, began to gather signatures for a ballot measure that would upend the wage hike until it could go before voters next year. In retaliation, more than 30 elected officials joined the union by signing a letter that claims the business coalition is misleading voters.
The counterattack against the hospitality wage hike is justified. Minimum-wage hikes are not free of economic consequences. They cause job and benefits losses, set off business contractions, and they don’t lower poverty rates.
Now imagine this happening citywide, not just within the travel and entertainment sector. A $30 minimum wage throughout all of Los Angeles, even one that grows in increments, will cause adverse impacts. Businesses will have to downsize. Some might move to nearby communities in Orange, Riverside or San Bernardino Counties with a lower wage. Those unable to leverage automation will have to consider closing and eventually some will shutter their enterprises. Wrenching decisions will need to be made. The least-skilled workers will be underemployed and unemployed in alarming numbers. (According to the Employment Policies Institute, California’s $20 wage law for fast food workers, which took effect April 1, 2024, “cost non-tipped restaurant workers 250 hours of work annually, equating to up to seven weeks of lost work.”)
Economic vibrancy will give way to sclerosis.
Maybe that last outcome on the list is the way Unite Here Local 11 wants it. The union is also working toward a ballot measure that would force a public vote on large hotels construction and major hotel expansions. It would, as well, “require a public vote on the development or expansion of ‘event centers,’ such as sports stadiums, concert halls or the city’s Convention Center,” reports the Los Angeles Times.
It’s hard to understand why the union would want fewer jobs, but then maybe this isn’t about containing development as much as it is about squeezing developers: The union will support proposed projects in return for extortionary labor concessions.
There are plenty of easy-to-read economic reports that explain how wage hikes negatively affect employment and business activity. A “preponderance of the scholarly literature remains on the critics’ side.” Of course, the union and other wage-hike supporters are banking on the sad fact that most voters won’t read it.
Kerry Jackson is the William Clement Fellow in California Reform at the Pacific Research Institute.
