Road Warrior

A big win in the minimum wage battle, but the war is far from over

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With the federal minimum wage stuck at $7.25, the battle for better wages has moved to the state and local levels. Workers on the front lines celebrated one of their biggest victories yet this week when the Los Angeles City Council approved what may be the highest minimum wage in the country for hotel workers. But passage of the $15.37 hourly rate also highlights the challenges unions face in preserving jobs and growing wages as they target specific areas and industries.

The rate will likely apply to only 39 of the city's 350 hotels because of exemptions. It could also wind up backfiring in the short term by triggering layoffs at affected hotels and creating an "ill-fated competitive difference" with nearby exempt businesses, said Bob Amano, the executive director of the Hotel Association of Los Angeles.

Still, workers say big victories like this help bring attention to the issue and give a boost to nationwide efforts to raise the minimum wage.

"Workers across the country are gaining momentum in their fight for better jobs and better wages as seen in this win," said Gabe Morgan, vice president of Local 32BJ of the Service Employees International Union, citing other recent victories like the $12 minimum wage now on the books for airport contractors and subcontractors doing business with the city of Philadelphia.

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The $15.37 hotel wage passage leapfrogged over a proposal from Los Angeles Mayor Eric Garcetti, who has pushed for a gradual, citywide increase in the minimum wage to $13.25 by 2017. It's also higher than the $10.10 federal rate proposed by President Obama, which would be the first nationwide increase since 2009.

In fact, the minimum wage is higher in many states and cities now than the federally required minimum, with San Francisco city and county currently the highest at $10.74, according to the Economic Policy Institute. Seattle will have the highest citywide rate at $15 once it's fully phased in, starting in 2017 with large employers and applying to everyone by 2021. And voters in Alaska, Arkansas, Nebraska and South Dakota will consider ballot initiatives in November that would raise the minimum wage above the national rate.

Case for minimum wage hike

As for industry-specific laws, SeaTac near Seattle, already has a $15 minimum wage on the books for some hotels and parking lot workers. Closer to L.A., voters in the city of Long Beach approved paid sick days and a minimum wage, now $13.53, for its hotel workers. And in Los Angeles, workers at LAX have had their own living wage ordinance since 2010, which is now up to $15.84 per hour for those without health benefits or $11.03 for those with benefits. In the city of San Jose, the minimum wage for airport workers is $15.38 (or $14.13 if health benefits are provided).

Increases aren't limited to the travel and hospitality industries. The state of California, which is set to raise its minimum wage to $10 per hour on January 1 from $9, even has a set minimum wage for sheepherding, a round-the-clock job that must pay at least $1,600 a month. In Washington D.C., the district council has set a special minimum wage and benefits requirements for security guards.

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The current Los Angeles plan is something of an expansion of an earlier law that applies only to airport-area hotels. Since 2008, the 12 hotels near the Los Angeles International Airport have paid a higher minimum wage. Although wages near the airport initially went up, the hotels "have adjusted to the pay increase with investments in labor-saving technologies and thus reducing employment," states a report to the council prepared by Beacon Economics. Those workers are now making at least $12.28 per hour or $11.03 per hour if they get benefits.

In addition to the lost jobs and reduced hours, all new hotel construction near the airport has moved to the neighboring cities of El Segundo, Inglewood, Manhattan Beach and Culver City where the rule doesn't apply, Amano said. Likewise, the new Los Angeles city rule will not apply to the L.A.-area municipalities of Beverly Hills, West Hollywood, Burbank and Santa Monica.

There are also other exemptions to the new law, which will be phased in starting July 1, 2015, at hotels with more than 300 rooms, and on July 1, 2016, at hotels with at least 150 rooms. Hotel owners can argue for a one-year exemption if an audit shows it would cause bankruptcy or worker layoffs in excess of 20 percent or an overall hours reduction of 30 percent. The council also called for a study to determine whether historic hotels should also be exempt.

Earlier versions of the ordinance would have applied to hotels with as few as 100 rooms, and then 125 rooms. The final version that came out of committee Monday put forth the phased-in 300-room and 150-room plan. "It's diminished quite a bit," to the point that the raises may apply to maybe only 6,000 people, Amano said.

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Still, supporters have argued that a $15.37-an-hour wage will make a big difference to those employees who get it. "That's about the minimum you could be paid and not have to rely on public assistance" in the city, Leigh Shelton, spokeswoman for the UNITE HERE hotel workers union in Los Angeles, told CNBC earlier this month.

The American Hotel & Lodging Association, which represents hotel owners, chains, and suppliers, has pledged to fight wage hikes like these, which it has dubbed an "extreme minimum wage."

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The hotel industry has said it's exploring its legal options over the new minimum wage, but Paul Sonn, the general counsel at the National Employment Law Project wage advocacy group, said they're not likely to win since the 2008 airport-area law was already upheld by the California Supreme Court.

Some have argued that the hotels are fair game because they receive government subsidies and can pass along needed increase to non-locals. "Hotels are both uniquely subsidized and uniquely taxed," states a report to the council from the Economic Roundtable. "Cities have long recognized the need to stimulate tourism and have supported hotels in order to achieve that goal, for example, by building convention centers, which are often loss leaders, supporting marketing through convention and visitors bureaus and by directly subsidizing the construction of new hotels or the renovation of existing hotels. Many of Los Angeles's hotels have been built with such supports over the years."

Since Wednesday's 12-3 vote in Los Angeles was not unanimous, the same council members will reconsider the matter Oct. 1, but the approval is likely to be just a formality since only a simple majority of eight is required for passage.

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