$30 minimum wage would be an Olympian error for Los Angeles
The Los Angeles City Council is hiking the minimum wage for hotel and airport workers to $30 an hour. It will turn out to be a five-diamond mistake.
The vote wasn’t even close. By a 12-3 margin, the Council decided to give a raise to workers they don’t employ and bloated payrolls that will have to be met. The “wage increases are expected to impact 23,000 workers, or about 40% of airport employees and 60% of hotel workers,” according to the Westside Current.
One of the three who sensibly refused to go along was Councilman John Lee from the northwest corner of the San Fernando Valley. His perspective: The council was going to “take an ax to the local economy.” Councilmembers Traci Park and Monica Rodriguez also opposed the increase, “saying they fear hotels and other businesses will scale back operations, cutting employees or turning to automation,” the Los Angeles Times reported.
“My hope,” Rodriguez said, “is that we’re not creating the best paid unemployed workforce in the country.”
Which is the most likely outcome. When the cost of labor rises due to causes not related to market mechanisms, jobs fall. Maybe the unemployed workers can stay in all the rooms that will be empty after hotels jack up their rates to try to pay for the artificial raises their workers will be getting. Or those empty rooms will become luxury accommodations for the homeless.
From the current minimum wage of $17.28 an hour, the increases will be implemented incrementally, starting $25 an hour on Feb. 1 next year. The minimum will increase almost immediately after that, to $26.25 an hour on July 1, 2025. Three more July 1 hikes will culminate in 2028, when the “living wage” hits $30 an hour, less than two weeks before Los Angeles hosts the 2028 Summer Olympics.
A few workers will still be around to enjoy their government-mandated pay hike. But many will lose their livelihoods, just as fast-food industry workers lost theirs when they were told by their employers their services could no longer be afforded.
The latest data show what any thinking person would have expected.
“Since the signing of the $20 minimum wage law” in September 2023, “California has lost over 6,100 fast food jobs,” the Employment Policies Institute said earlier this month, basing its claim on a federal Bureau of Labor Statistics report. “That’s a steep decline from the same period last year, when the state added over 17,500 fast food jobs.”
The losses amount to a 1.1% decline in California fast-food jobs and “is unique to the passage and implementation of the $20 wage law,” EPI adds.
The rest of the country didn’t have a string of “bad luck,” though. Over the same period, fast-food jobs grew nationally by 1.6%.
In a comparison not unlike Lee’s “ax” comment, EPI research director Rebekah Paxton said Gov. Gavin Newsom “took a sledgehammer to the state’s restaurants when he signed the $20 fast food minimum wage law.”
The damage won’t be limited to the fast-food workers’ bank accounts. An EPI survey conducted in June and July, just months after the new minimum wage kicked in on April 1, found that two-thirds of fast-food operators said climbing wages will cost their restaurants at least $100,000 per location. More than a quarter, 26%, said the added labor expenses will cost them at least $200,000 per location.
What’s more, almost all, 98%, admitted they had already raised menu prices and 89% had cut their employees’ hours. Nearly three-fourths “limited employee shift pick-up or overtime opportunities” while seven in 10 “reduced staff or consolidated positions.”
Expect more of the same in 2025: 93% of respondents expect to raise menu prices next year; 87% will cut workers’ hours (87%); 74% will reduce staff or consolidate positions. Shift pick-ups and overtime opportunities will disappear in 71% of the restaurants. Three in four say their number of employees will decrease (50% somewhat, 25% significantly decrease.
The same defective thinking that is squeezing the fast-food business, bleeding its employees and depleting its work force is coming to the tourism industry in Los Angeles. The 12 members of the City Council who voted to blow the minimum wage through the InterContinental hotel’s 73-story roof have had every opportunity to learn from the state’s mistake – the wreck has been unfolding right in front of them.
Kerry Jackson is the William Clement Fellow in California Reform at the Pacific Research Institute.