The Los Angeles City Council passed legislation 12-3 requiring “hotels with more than 60 rooms, as well as companies doing business at Los Angeles International Airport, to pay their workers $30 per hour by 2028” plus “hotels and airport businesses would be required to provide $8.35 per hour for their workers’ healthcare by July 2026. The rest of Los Angeles will have a $17.28 minimum wage. (HT: @crucker)

To become law, the City Council needs to pass this again in a second vote on May 23.

A hotel janitor’s mandated base pay will far exceed what an entry-level retail or restaurant worker makes across the street. The City Council says a bellhop’s time in a big hotel is worth almost twice what a barista’s time is worth in a café and according to one councilmember that’s a matter of “human rights” and fairness.

A minimum wage is a price floor on labor – a legally mandated minimum price for hiring. And like any price floor set above the market rate, it creates a surplus: in this case, a surplus of workers seeking jobs, but a shortage of jobs available for those whose skills aren’t valued at the new, higher price. You can’t simply decree that a job which used to pay $18 is now “worth” $30 without tradeoffs.

If a worker’s productivity or skill would only create $18 in value for their employer, a business will not (cannot sustainably) pay them $30. The employer has options – none of which involve happily paying $30 for $18 worth of output.

1. They may not hire the worker at all. Outlawing jobs below a certain pay doesn’t guarantee higher-paid work; it guarantees unemployment for those priced out. If a person’s skills or experience don’t merit $30 in the market, this law has made it illegal for them to earn a wage at all.

   Consider an immigrant with limited English who might start in hotel housekeeping, dishwashing, or entry-level service jobs. At $15 – $20 an hour, an employer might take a chance and hire them, training them on the job. At $30 an hour, that same employer will likely demand a more experienced, highly productive worker for the role (if the role isn’t eliminated altogether). The rung at the bottom of the ladder gets sawed off.

2. Employers substitute and automate. When labor gets costlier, it drives businesses to find ways to get by with less labor. That can mean investing in machines or tech or shifting work onto customers or remaining staff. Many chains curtailed daily housekeeping and never restored it fully (often spinning it as “green choice” to save water, while conveniently saving on payroll).

   Expect more automation at the airport and hotels: kiosks instead clerks, mobile ordering in airport eateries, robotic floor cleaners. Even trash collection can be automated; Pittsburgh deployed robotic vacuum sweepers. When labor costs skyrocket, technology that replaces that labor suddenly looks a lot more attractive.

3. Different workers will be hired for $30 roles. Minimum wage hikes often don’t improve the lives of the same workers – they replace the workers. A $30 hotel job will attract a flood of applicants, including many with more experience or higher skills than the current workforce. Employers will have their pick of a different pool of labor, replacing many current employees with people who can command $30. Giving a position a raise isn’t the same as giving a person a raise.

4. Hours and non-mandated benefits get cut back. If an employer must pay each worker more per hour, one way to compensate is to reduce the number of hours offered. Full-timers might be pushed to part-time to avoid benefit thresholds; overtime hours get trimmed; ancillary perks like free meals or parking might disappear. Even the workers who keep their jobs might find themselves working harder for the same take-home pay – doing the work that two employees used to do, under more pressure.

5. Businesses can try to pass on the higher costs to consumers – but that has limits. Hotels will raise room rates; airport concession stands will jack up that already pricey cup of coffee. Some customers will pay more, essentially transferring some of the wage hike cost onto tourists and travelers. But if prices rise too much, demand falls – tourists may choose hotels outside the city mandate, and diners may skip that $25 airport burger or trade down to cheaper snacks.

   In effect, L.A. could make itself even more expensive, driving away the very tourism dollars it’s trying to redistribute.

This policy carves the city’s economy into favored and disfavored sectors. By 2028, a maid cleaning rooms at a large L.A. hotel must be paid $30, but a maid cleaning an office building or a small 50-room motel across town will still earn around $17–$18 (the broader minimum in place at that time). A cook flipping omelets at a hotel’s restaurant will cost double the labor expense of a cook flipping identical omelets at the diner down the block.

Businesses and workers will respond to the pay gap. If you’re a restaurant server or line cook, you’d obviously rather land a job at the hotel where pay is twice as high. That means the big hotels will have a flood of applicants, poaching some of the better workers from other restaurants and cafes. Those other establishments could then face staffing shortages and declining quality, as well as wage pressure not provided for in the law. The city is picking winners and losers: large hotels and LAX contractors are told to bear a hugely increased labor cost, while their competitors in other parts of L.A. get to follow the much lower citywide minimum.

Consider hotels that operate restaurants or offer room service. Suddenly their labor costs for waiters, bartenders, cooks, dishwashers will be nearly double that of any standalone restaurant not on hotel property. That makes them cost-uncompetitive with non-hotel restaurants. And they need to focus on higher priced meals (pricing out many guests, exacerbating inequality) and higher margin items (a flight to more alcohol). Many hotels will be forced to close down on-site dining or convert to self-service, since they can’t compete. Fewer restaurant outlets in hotels means fewer jobs for servers and cooks.

Hotel development in L.A. will slow, because projects will no longer pencil – and because the city council is telegraphing a willingness to impose higher costs on the sector in a discriminatory fashion in the future, too. That means fewer jobs and higher prices which keep tourist dollars away. Los Angeles, poised to host the world in 2028, is discouraging new hotels from opening or expanding right when they’ll be most needed. On the other hand, some hotels may downsize below 60 rooms to escape the law’s threshold, which also removes inventory from the market.

This $30 tourism wage is the result of a Unite Here Local 11 (hospitality workers union) and SEIU airport workers local campaign. The ordinance doesn’t cover unionized workplaces if the union contract waives it. This encourages unionization to lower costs creating a huge drive towards unionization (and increase in dues for the union itself).

Meanwhile, by targeting a specific sector, the city doesn’t risk the economic damage from a Los Angeles-wide $30 minimum wage. And airports and hotels can’t easily relocated outside of the city the way many other businesses could. But don’t expect to be able to get wheelchair assistance at LAX because the contractors who provide that service aren’t going to fully staff.

Local politicians can raise the minimum, but they can’t outlaw unintended consequences. And sooner or later, those consequences have a way of reminding us that reality isn’t optional, not even in L.A. But it could be worse for the industry. The City Council could bring back the proposal that every hotel in the city be required to house the homeless.