Employment declined at hotels in the LA International Airport district after they were subjected to a “living wage” requirement – even as hotel hiring increased outside that “living wage” zone, an economic development policy expert told the Anaheim City Council during testimony about the likely impacts of the Anaheim Resort unions’ proposed $18 minimum wage initiative.
Ruben Gonzalez, along with elections law expert Bradley Hertz, was invited to brief the Anaheim City Council on May 15 regarding the proposed $18 minimum wage initiative pushed by a coalition of Anaheim Resort labor unions. Gonzalez, who is a strategic advisor on economic development to the Los Angeles Chamber of Commerce, testified about a similar requirement the Los Angeles City Council imposed n 2006 on a dozen hotels adjacent to LAX. He said the requirement hurt those it was intended to help, citing data from a city-commissioned study completed in 2012.
“I’m here to say ‘learn from the mistakes of Los Angeles,'” said Gonzalez. ” We have made it more expensive to service the hospitality industry. We have made it harder to find employment in the hospitality industry. And all of that has to do with various wage and labor regulations that have been put in place in Los Angeles.”
Like the UNITE-HERE Local 11-led Coalition of Resort Labor Unions is doing now, in 2006 UNITE-HERE Local 11 targeted a specific area of Los Angeles – the district around LAX – for a “living wage” requirement. As in Anaheim today, the unions then claimed there were public benefits obtained by these business as a justification for imposing on them a higher minimum wage than hotels outside the LAX district. Like the Anaheim Resort unions, that union coalition also claimed they were not seeking to impose the hotel “living wage” requirement city-wide.
“Six years later, the same advocates who said we’re only going to do it for these hotels in this one area, came back said ‘No, now we need to do it for the entire city,” Gonzalez told the council.
Gonzalez presented the findings of a city-commissioned study that examined the economic impacts of the LAX minimum wage hike six years later. According to the study, employment at LAX hotels subjected to the “living wage” declined by 10% – while employment at Los Angeles hotels outside the “living wage” zone increased 12% during the same period.
A similar dynamic repeated itself after the union-dominated Los Angeles City Council extended the hotel living wage ordinance citywide: hotel employment in LA declined while increasing in the rest of California.
It doesn’t take a rocket scientist to understand why.
“Keep in mind, for every dollar you raise a wage, you’re actually raising labor costs four dollars – because payroll taxes, workers comp costs – so many other financial requirements are based on the wage that you’re paying,” said Gonzalez, illustrating the economic pitfalls for Anaheim should the Anaheim voters approve the $18 minimum wage requirement. “These are significant increases beyond the three-plus dollars an hour seen in this initiative.”
“We do need to raise the quality of life for folks who work in the service industry, here in Anaheim and throughout the state. We do need to find a way to make housing more affordable. But this initiative is not the answer,” Gonzalez told Anaheim councilmembers. “And what this data shows very clearly is it can actually be a detriment to the very people that the advocates pushing this are claiming to help. Let’s the find the real solutions to these problems. Let’s find the real solutions to lift people up.”
Every member of the council put questions to Gonzalez and Hertz, with the exception of District 1 Councilmember Denise Barnes (which is not unusual for her).
District 3 Councilman Jose F. Moreno is a supporter of the $18 minimum wage initiative and a close political ally of the Resort unions. While his intention was to discredit Hertz and Gonzalez, he mainly succeeded in illuminating his comparative economic illiteracy.
Moreno stated his position that Anaheim’s planned 4-Diamond hotel projects could afford the $18 minimum wage because the TOT rebate gives them a buffer – as if that is just extra money the developers have laying around.
Gonzalez responded that the purpose of that economic assistance was pencil out the project so the hotels would be built.
“That rebate on TOT or whatever revenue stream was factored in to the ability to both build and operate that, within that deal was not a significant increase in labor costs, so the answer I would say is no there is not an extra margin because of the subsidy,” Gonzalez informed Moreno. “That is simply the excuse used by the proponents to push for this regulation.”
Moreno dismissed that explanation as “opinion” and challenged whether Gonzalez had seen the hotel projects books.
“Have these three hotels shown you their margins? Have you seen those?” said Moreno, apparently oblivious to that fact he hadn’t seen these hotel projects books when he ventured an opinion about their ability to absorb a massive, escalating wage increase.
Further into the exchange, Gonzalez mentioned the Burger King inside one of the LAX hotels that is famous for its $9 or $10 Whopper.
“That’s what it had to go up to meet the wage requirements,” said Gonzalez. “So, my guess would be that the hotel workers were not buying the $9-10 whopper across the street, they were waiting to get home to shop in their own communities.
“Yeah I mean that’s fair but the Burger King is inside of a hotel that has public money, so to the extent that they want to price themselves out is up to them,” replied Moreno. “So, somebody must of been buying them right, it’s a free market so somebody must of been buying those $9 burgers which then creates more revenue”
Government-dictated wage floors that inflate the cost of a Whopper to $10 is in reality an economic stimulant that lifts the economy, rather than a hidden tax on poor and working people. There you have it: Morenonomics.