LA City Council Considering $30 Minimum Wage For LAX Airport And Hotels

There’s an L.A. City Council proposal to raise the minimum wage at LAX and at hotels to $30 per hour. Six of fourteen city council members have expressed support, and none of the other eight have expressed opposition.

The proposed minimum wage increase would apply to all hotel workers—including housekeepers, room service attendants, and other hospitality staff—working at hotels with sixty or more rooms. The increased wages would also apply to workers at LAX, including security guards, baggage handlers, janitors, airline catering employees, retail and restaurant workers, as well as other airport staff at LAX.

One Mile at a Time finds it vexing that a minimum wage would be targeted at airport and hotel workers, rather than all workers?

What I’m a bit confused by is why it’s specifically hotel and airport employees who would be eligible for this high minimum wage; why not extend this to other workers as well?

This isn’t at all uncommon. There have been higher minimum wages at LAX, San Francisco and Seattle airports than their surrounding communities. New York JFK and LaGuardia airports have similar setups. These differentials though are usually just a couple of dollars per hour.

There’s a reason for the focus on airports. You can’t just build a new major airport. There hasn’t been one built in the United States in 28 years. Even just building 3 new gates in Austin at the West end of the existing terminal is going to take three years, and that’s a project that’s already been in the pipeline for some time.

When airports have more airline demand than facilities or airspace capacity, airport fees don’t usually rise to an equilibrating level. For instance, more airlines would add more flights to New York JFK and LaGuardia and at London Heathrow if they could. That winds up reflected in the value of slots, government-granted permission to fly which airlines then turn into property rights and sell. However LAX doesn’t have slots.

The airport can raise costs on customers and airlines because there’s more demand for use of LAX than the airport is able to support so from there perspective there’s virtually no cost to raising the price of serving LAX and reducing demand.

Similarly, the bet is that hotels are stuck accepting the wage increase rather than shutting down. Hotels are expensive capital investments. You can’t pick up a hotel and move it. In some sense a higher minimum wage as-applied to hotels is a Georgist tax which falls on the landowner that they cannot easily escape.

If you apply $30 minimum wages to restaurants you’re going to see a lot fewer restaurants inside the city. If you apply a $30 minimum wage to storefronts, they’ll pick up and move at least once they can terminate their lease (or they might be forced into bankruptcy, and maybe open up again somewhere else).

So what effect would this have?

  • It makes airport and hotel jobs far more attractive
  • Airports and hotels will have their pick of a different pool of labor. To be clear, you’re not giving a big raise to current employees you’re going to be replacing those employees with the pool of people you can hire for $30.
  • But at those wages you’re going to want fewer people! One of the early reasons for a minimum wage was to keep lower-skilled, usually minority employees from competing with union (often white) labor. You might be able to hire 5 people at $3 an hour and get more productivity than a single $15 an hour worker. But raise the minimum wage to $7.50 and the union labor looks a lot more attractive.
  • In addition to redistributing who gets works, you’ll see a shift from full service to machine service. It’s hard enough as it is to get a hotel to perform proper housekeeping! Once they have to pay housekeepers $30 they’re going to push towards a bare minimum cleanliness standard.

There’s no question that much of Los Angeles, San Francisco, places like New York and Boston can support far higher minimum wages than places like Alabama and Mississippi. In Mississippi a $15 minimum wage is problematic because $15.15 is the median wage to start with. The median wage in Los Angeles is over $25.

When you set a minimum wage below the market-clearing wage, you don’t see a significant effect on overall unemployment. LA can’t set a $30 citywide minimum wage because that would clearly be harmful to too many workers whose marginal product isn’t valued by employers at over $30. But they can set it in specific industries where there’s been massive capital investment that cannot be easily moved. At least that’s the theory which would support imposing a minimum wage at LAX and hotels.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Pingbacks

Comments

  1. This is the city government shifting some of the windfall benefitting the capital owners who happen to own property near the airport to the workers that allow them to monetize that capital.

    The workers likely live in the city. The capital owners probably do not. It’s in the city’s interest to direct revenue generated from their airport into their locality.

  2. This is crazy but it is LA LA Land. We did just build a new airport in Kansas City, too 3 plus year to build and was 50% over budget.

  3. When the prices for everything at the airport and hotels are correspondingly increased to pay for these higher wages, see what the people think who have to pay those prices. Just like everywhere else this has happened in the last couple of years, it’s called inflation.

  4. I’m in favor and hope the many current workers who are worth $30/hr are retained at the higher rate.. Additional thought: “But they can set it in specific industries where workers whose marginal product is valued by employers at over $30”

    Reducing worker shortages should occur. And I’m all for efficiency. The raise can be covered by pricing increased revenue from rising demand appropriately. And lots of these jobs should pay more for many reasons. Devil in Details YMMV 😉

  5. Current LAX living wage ordinance calls for pay of $23.81 without health benefits, so an increase to $30 over many years is hardly a major change.

  6. I think this is such a great idea, I’d say they should increase the minimum wage to $50 per hour!

  7. Prices of food, services, and goods will increase accordingly.

    I lived in Mexico for 3 years, and a government law mandated across the board pay hikes for all employees on January 1 of each year. My employees were thrilled–until they went to the local grocery store and saw prices had increased by the exact amount of the wage hike. This system doesn’t work, it’s an inflationary death spiral. Instead, I suggest offering the employees better benefits.

  8. @ Gary — Based on Brent’s comment, the noise around this proposal is basically a bunch of nothing. Assuming that the current 2023 minimum is $23.81, the $30 figure in 2028 simply represents an annual increase of 4.73%. That sems fair to me, at least given current rates of inflation. If there is concern that inflation will soon return to 2% (not gonna happen), then I suppose one could argue that the incresaes only be guaranteed up to $27.50 in 2026, or something else shorter in duration.

  9. “I’m in favor and hope the many current workers who are worth $30/hr…”

    Writes the individual who won’t be the one writing the checks. How easy it is to spend other people’s money. It fascinates me the number of people who support the use of government force to achieve a particular goal. Minimum wage laws are a clear violation of individual rights.

  10. And in other minimum wage law news, Sweden and Denmark are opposing the EU’s push for minimum wage laws. These two “socialist” Scandinavian EU countries are against having any private sector minimum wage set by elected politicians or government bureaucrats.

  11. @Gene – I’m not jumping from the rooftops citing doom. Read my concluding paragraphs. The whole point of the post is to explain how they can do it at airports and for hotels, and how that’s different than doing it everywhere. (These are the same factors that have allowed for higher minimum wages at the airport already.)

    But the airport minimum wage is different than the current hotel minimum wage. It’s a one-third increase in minimum wage for hotels immediately. That’s material.

  12. I wonder if there will eventually be an optional check in fee if you do not check in using the app but use the hotel clerk?

    Will hotels give the option of either paying the hotel a $100 cleaning fee or using a hotel approved independent contractor who charges $15 to clean your room?

    I do not earn $30 per hour.

  13. “To be clear, you’re not giving a big raise to current employees you’re going to be replacing those employees with the pool of people you can hire for $30.”

    I think normally this would be true, but the workplaces in question in these specific industries in this specific location are often heavily unionized. So it will take much longer, I’d bet, for the current workforce to filtre out.

  14. This is socialism plain and simple. California leads the nation in trying to push it and yet they list two seats in Congress. People are moving to low paying cities in the South because the illusion of better income for a few cannot offset the much higher taxes for all but the richest.

  15. Another reason why AA’s PHX hub won’t ever go away and will continue to grow, now larger then PHL. How Covid and government do gooders changed things.

  16. I look forward to avoiding tipping. There will be no need to feel obligated to increase pay for these folks.

  17. This is asinine on so many levels. Where do they think the money will come from? All this will do is increase coats across all levels. And after this stupidity takes effect, what do you think the rest of the working population will do? This type of stupidity will only cause more inflation and a giant recession. Dumbest thing the DemocRats have come up with yet. Good bye America, Venezuela here we come.

  18. Just curious whether the arrogant and self righteous right wing commentariat herein expects to receive their own annual wage increase to offset the rise in inflation over the next 5 years?

    IME such folk make any excuse not to seek, let alone negotiate, a wage rise for themselves, whilst entrapped in working countless unpaid overtime hours – something about having no balls to speak up for themselves in the real world, but perfectly happy to whinge about and criticise others who they deem less worthy from the safety social media and the blog sphere…classic right wing twats to a tee…;)

  19. @Gary Leff – I believe OMAAT is asking “why”? Simple, this is a proposal borne of politics, not economics. In Los Angeles, the city council members sponsoring the proposal, and those members thus far expressing support also have constituencies that – due to the geography of certain council districts – are made up large populations of airport/hotel and/or union workers.

    An ancillary, yet highly contributing factor, is term limits for elected officials here in California. SEIU and Unite are well embedded with the political machinery in L.A. Their influence is such that elected officials feel compelled to act vociferously in the representation of union interests.

    And the reason for that? These politicians – whether merely serving one term, or fortunate enough to serve two terms (eight years) – practically guarantee their post-political careers acting on behalf of these unions (or perhaps other unions) either in a consultancy role or lobbyist role.

    Anti-union politician in Los Angeles = career suicide.

  20. @ aaway

    Or it just be in the interests of the community that they were elected to represent rather than the tragically selfish and self important perspectives of certain commentators herein, who, evidently, have an infantile grasp of economics (in statements of extraordinary hypocrisy) and a highly over inflated sense of self importance (classic right wing trash)…;)

    Would bet that most didn’t even read the original article and mistakenly failed to grasp in their abject ignorance and triggered stupidity that the pay rise mooted is over a 5 year period. Duh. It’s just so easy to fool and manipulate the right wing apologists herein.

  21. I see a lot of comments stating that this will increase inflationary pressures at the airport. The problem is that labor is but a small part of the overall cost of the things you pay for at an airport. 50% of the inflation happening right now is in the form of corporations raising prices and increasing their profit margins. Corporate profits are very high right now. Only about 20% of inflation is due to increased wages right now. The problem is the monopolistic powers that corporations are enjoying right now. We have allowed so much consolidation over the last 40 years that we have eliminated much of the competition out there, and the competition that remains effectively colludes with each other to avoid competing in price and eroding profits.

    Those employers that this minimum wage would affect have a lot of pricing power, and they already use it, and have great profit margins, just look at their quarterly reports. They can afford higher wages. As another comment put it, because those employers are not local, and suck money out of the area, the increased wages will help keep cash in the local economy because the employees actually live there. And the cost of living in that area is not cheap. $30 is probably needed to keep food on the table. Trying to buy a house there.

    But the question of the article was why just these people and not all? Keep in mind that these wages will attract people from other jobs. This minimum wage will drive the wages in other jobs higher as employers are forced to compete against this minimum wage. So the net effect, while not direct, will be a wage increase by all in the area. This in turn will help keep cash in the local economy instead of sending it to investors on wall street and improve the economy. Higher wages help the economy more than corporate profits. We need to rebuild the middle class, and this is how you do it.

  22. some people including some down under can’t grasp that flashy news headlines like this only will lead to higher wages for a handful but much larger taxes for all.

    You need only look at the shifting US census – which was largely done before the massive covid population movements – to see how the majority of people have voted.

    In a country where the number of total seats in Congress is constant, Florida and Texas have gained seats while California and NY have lost seats – and the trend will continue throughout this decade.

    People in the real world are making decisions about their own economic benefits and costs. There is a larger economic and ideological division in the US than ever before and stunts like this to prop up a handful of people economically while increasing everyone else’s taxes doesn’t work.

    The evidence is abundantly clear for those that want to see it.

  23. @platy – Having once been employed in the airline industry in L.A., I attempt to walk a magnanimous & pragmatic fine line with regard to the LWO. When initially established in the 2009-2010 timeframe, wages for affected employees had been stagnant for some time – certainly vis-a-vis the trajectory of costs of living over a similar period of time. The policy has been a social safety net to some degree.

    To bring @UnionTHAT into the conversation, the LWO has been instrumental in inducing regional, wage resets in non-affiliated, yet competing industries that help stabilize that large slice of the local population we call “middle class”.

    However, once the pacing wage gains (airline/hotel LWO cohorts) are eventually met by other industries – sorry but no – the ability to attract talent from outside winnows dramatically, particularly for what are classic entry-level positions. Occasionally there are economic shocks in other industries that spur employment interest. But, with exception of those individuals that through benefit and dint of education, move on, by and large the entry level employee bases engaged in customer contact or physically demanding roles remain stagnant. That is the conundrum the affected employers face. In theory, better wages attracts better employees. In reality, it’s more the cyclic ‘wash-rinse-repeat’ of the existing talent pool where further productivity gains are minimal.

  24. You need $100 to survive in LA and california as a whole//even then you cannot buy a house.. A Bay area study showed $350 an hour was more realistic to live there !!! The SO -CALLed living wage of $350 an hour…. is unsustainable

  25. Joke is on the socialists! LA (my city of residence) is massively corrupt and failing!

  26. @ Tim Dunn

    Not sure what fantasy world you live in, mate, but even down under people expect their wages to grow in line with cost of living – presumably you are content for your own wages to go backwards in relative terms in the national interest (I bet you are not!).

    The irony being that those who do enjoy the wage rises (that they would deny others) are happy to subscribe to the notion that higher wages puts more cash into the spending pot to drive the economy and increase income tax revenues. When it’s somebody else who gets the wage rise, they are happy to denigrate the wage increase as unaffordable.

    What’s your solution for negative wages growth, with accelerating living costs, particularly in certain city locations?

    People down under are trending away from the dumb right wing – the right wing national government was kicked out at the last federal election and its current polling position is abysmal – every state /territory (except Tasmania) had turned its back on the right wing.

    Crucially, the right wing opposition parties have been exposed for exactly what they are, “mean” and “tricky”, and they predictably resort to the fall back position of an insane culture war (current case against Indigenous voice to parliament) in a vain attempt to invoke societal divides rather than national unity in an appalling display of lack of leadership (just like the odious De Santis stirring up hatred against transgender people and anything dumb right wing folk call “woke” despite being incapable of defining the item). Message to Ron – you’ve got real problems to fix – even the media down under are enjoying trashing the dude…;)

  27. @ aaway

    Just curious – how do you see such cycles being challenged by “abnormal” negative wages growth with locally highly accelerating cost of living pressures?

    And to qualify – the mooted wage increase (over 5 years) is specific to one of those areas where such factors would be atypically very applicable…

    Will be back in LA is a few weeks’ time – will take the opportunity to ask the customer facing locals whether their wages enable a sustainable life (although they may be at the upper end of the talent pool given the hotels/ bars that I would be frequenting…;)

Leave a Reply

Your email address will not be published. Required fields are marked *