Long Beach Experience Illustrates the Predictable Effect of a Super-High Minimum Wage
An article in The Seattle Times this week explains the real world effects of what happens when employers are forced to pay a super-high minimum wage.
The article features a hotel worker who served as the actual poster boy for the campaign to increase the wages of hotel workers in Long Beach, California. This hotel worker lent his image and story to successfully convince voters to pass a measure last year mandating a minimum wage of $13 per hour for the employees of nonunionized hotels. Like the SeaTac initiative to mandate a $15 per hour minimum wage, the Long Beach measure included an exemption for unions.
One year later this worker admits mandating the $13 per hour wage had “unintended consequences.” His employer reduced his hours from 40 hours per week to just 30.
A worker at a different hotel tells the same story. Her hours were slashed from 40 to 32 per week, and now she says her and her co-workers must work harder to do their job in less time. “Sometimes, rooms don’t get done. There’s not enough time to do everything.”
They aren’t the only casualties.
According to The Times, two hotels shut down rooms that bumped them over the 100-room threshold that triggers the high minimum wage. One closed 44 rooms and the other closed 74, saying the measure, “financially cripples the hotel’s operations." Those closures mean less business for the hotels, which generates less tax revenue for the city and likely means fewer workers are needed.
Another hotel says it was forced to raise prices and quit offering discounts to customers. The manager of that hotel explained that, “discounted prices don’t match with the new hourly wage increase.”
Two hotels took advantage of the union exemption and negotiated a union contract that will allow them to pay their workers less than the $13 per hour wage. The union gained more dues-paying members, what those workers gained remains to be seen.
None of these responses from the hotels should be surprising. It is exactly what the basic laws of economics predict will happen when you force employers to pay a wage that is significantly higher than warranted by the market.
A super-high minimum wage is never free; someone has to pay for it. It is not reasonable to believe employers will simply absorb a huge increase in their cost of doing business. The Long Beach experience shows employers are passing those costs onto consumers and the very workers the measure was supposed to help.