We need a federal minimum wage standard
17 JUNE 2014 6:26 AM
Wage increases are on the way, but it’s best if they’re accomplished through one nationwide standard rather than on a piecemeal, city-by-city approach.
No business owner wants his or her payroll costs to increase, and that’s especially true for owners of labor-intensive hotels. However, every hotel owner and operator needs to face the reality that sentiment is growing quickly for an increase in the minimum wage, which in the United States stands at $7.25 per hour as mandated by Congress.
And while it’s easy to rail against the frequent ineptitude exhibited in Washington, D.C., and to support the logic of setting policy on a local rather than centralized level, it would be best if there is one standard minimum wage across the country instead of piecemeal legislation carried out by individual cities and states.
In the past few weeks and months, lawmakers and voters in a number of jurisdictions have either raised or are contemplating raising the wage standard in their cities or states. And, inexorably, in some of those locations hotels and other tourist-related businesses have been singled out for specific wage increase mandates.
In Los Angeles, city council is considering a bill that would raise the minimum for hotel workers to $15.37 per hour. If passed, the new pay rules would apply immediately to hotels with 300 rooms or more; properties with more than 125 rooms would need to pay the new wage starting a year later.
In Providence, Rhode Island, voters might decide this fall if the minimum wage increases to $15 an hour for hotels with more than 25 rooms. Likewise, San Francisco voters will be asked whether to gradually raise the minimum to $15 an hour over the next four years. If passed, the standard will apply to all businesses, not just hotels.
SeaTac, Washington, got this home-rule minimum wage ball rolling last year when the electorate decided to raise the standard to $15 an hour at hotels with at least 100 rooms, plus other kinds of tourist-related businesses. Some of these businesses in the community have responded by adding a so-called living wage surcharge to customer bills, effectively increasing the room rates or parking lot charges in the city.
This hodge-podge approach to the issue could stunt hotel development in some communities and shift visitor business from one community to another. SeaTac, which is home to Seattle-Tacoma International Airport, has a number of hotels, but so does Tukwila, Washington, which is just a few miles away. What will stop travelers from driving the extra three or four miles to save a couple of bucks a day in room charges?
The situation might even be sillier in Seattle, where the minimum wage was recently raised to $15 an hour for large employers in the city. Unfortunately, a loophole in the law requires businesses affiliated with large nationwide companies through franchise arrangements to pay the higher rates. The International Franchise Association, with the backing of the American Hotel & Lodging Association, has sued to turn back that provision, but it’s not clear whether the IFA will prevail.
There appears to be little or no appetite in Congress to deal with the issue of minimum wage at least until after the fall elections—and maybe not even then. As a result, it appears that the hotel industry and other businesses will be forced to deal with this myriad of laws across multiple states and cities.
This is a trend that can be damaging to hotel performance and to the attractiveness of the industry as an investment vehicle. A nationwide standard would put hotels on a more level playing field, removing any roadblocks to the industry’s ongoing success.
As in other aspects of business and life, different rules seem to apply in New York City.
While hotel owners in the rest of the country wonder how they will be able to adjust to unpredictably changing wage levels, operators of unionized hotels in New York can rely on stable wage rates for the next 10 years.
Of course, there is a downside. Union hotels in the city recently struck a deal with the hotel unions that will grant annual raises of $1 an hour for union employees in hotels. That means by the end of the contract—10 years from now—hotel housekeepers will be making nearly $38 an hour, or approximately $70,000 a year.
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