By Gary Hytrek and Lisa Hernandez
October 23, 2012 – On November 6, Long Beach residents have an opportunity to address two entrenched economic problems: the sluggish consumer demand that continues to hold back our local economy, and the continued generation of low wage jobs in one of our largest economic sectors. The proposed solution is Measure N, the Resolution for Minimum Wages and Minimum Sick Leave Payable to Hotel Workers.
More than 130 Long Beach small businesses support Yes on N. All of them point to one reason: the demand problem. Anyone doing business since 2008 knows that our attempts to climb out of the recession have been stymied by a lack of consumer demand. Low wages mean families lack the purchasing power to keep the economy going; fewer purchases in turn mean fewer jobs.
Why does Measure N only apply to the hospitality industry? The fact is the hospitality and tourism sector is the linchpin of our local economy. According to the CSULB 2012 Economic Forecast, this sector represents 10.1 percent of Long Beach employment. Yet wages hover beneath $10 per hour, less than half of the city’s median salary of $48,000, and create a drag on the city’s economy. Measure N would correct this by putting about $7 million annually into Long Beach’s economy. This increased purchasing power would create and sustain about 85 new jobs and generate an estimated $800,000 in added tax revenue for education, public safety and city services.
The most similar equivalent to Measure N is an ordinance requiring hotels near LAX to pay a higher minimum wage. Implemented in 2008, the LAX ordinance is estimated to generate $23.9 million local impact and created 106 new jobs, according to the “Transforming the Gateway to L.A.: The Economic Benefits of a Sustainable Tourism Model” study. These are impacts no one who operates a business in Long Beach should ignore.
Fifteen years of living wage evidence shows that living wage ordinances all reduce poverty, generate lower employee turnover and higher worker morale, and increase productivity. And Measure N is far from unique – more than a hundred local governments have passed “living wage laws” to raise standards to an appropriate local level. (Measure N’s $13 per hour figure is the amount needed for a single wage-earner with two children to live at the poverty level in Long Beach – at $2,000/month, it's hardly out of line compared to other living wage cities, $15.98 per hour in San Jose, $13.82 per hour in Santa Monica and $13.13 per hour in Irvine.
But is government intervention appropriate? That would have been a fair question to ask when government intervention was delivering over $750 million in taxpayer subsidies to the hospitality industry, including $114 million in direct assistance to hotels (since the 1980s, according to the “Tale of Two Cities” report). The public made an investment in Long Beach; it is only fair to expect a return on that investment that benefits all of Long Beach.
The hotels respond that higher labor costs will force them to raise room rates, making Long Beach “less competitive.” Yet there is no empirical evidence to support this contention; that’s not how living wage laws affect business, nor is it how hotels set room rates. As it turns out, room rates will rise independently of Measure N. Independent industry analysts PFK Consulting predict steep increases in occupancy and Revenue Per Available Room (RevPAR) over the next five years, resulting in a five-year expansion of 25 percent. This suggests a healthy industry able to pay reasonable wages.
Measure N as a sensible response to the realities of Long Beach workers we’ve met; workers who have been given ten-cent raises, have no or unaffordable health insurance, and raise young children in cramped apartments. As businesspeople, we know that workers are the heart of our companies. That providing them with a living wage engenders employee loyalty, pride, dignity and dedication. Workers who know they are appreciated show it in their work performance, creating customer loyalty and building a prosperous business.
This too is a sentiment backed up by empirical evidence. “What you pay people has an incredible effect on what you get from them,” argues economist Mark Brenner, a research associate at the University of Massachusetts’ Political Economy Research Institute. “Even the same individual will be a different type of employee depending on whether he or she is paid the minimum wage or something much above minimum wage.”
Measure N makes economic sense. Rewarding workers directly by raising their wages is good for business and good for the community. We often forget the workers who serve in our tourism industry are the welcome committee to our city. Raising standards for them is in the long term interest of everyone who lives in Long Beach.
(Dr. Gary Hytrek is a professor and director of the Applied Master’s Program in Sociology at California State University-Long Beach. Lisa Hernandez is the founder of the Long Beach Depot for Creative Re-Use, a downtown business.)