The debate on whether Los Angeles hotel workers should be paid at least $15.37 an hour opened last week with some less-than-expected allies for a "living wage" and some questions from City Council members about whether the proposal goes too far, or not far enough.
Two of the city's business titans, billionaire philanthropist Eli Broad and mall developer Rick Caruso, broke from the standard business-versus-labor divide when they said in interviews they support a higher minimum wage.
Broad said he favors a gradual increase to $15 an hour for all workers in the city, not just those at big hotels, as proposed by three members of the Los Angeles City Council. Caruso said he supports a government mandate for higher pay, probably $12 to $15 an hour, though he would prefer the higher wage be imposed by either the state or federal government.
The comments came as the council took the first step last week toward studying the economic impacts of an ordinance that would require the operators of hotels with more than 100 rooms to pay workers at least $15.37 an hour. That's the amount the city previously required for workers at Los Angeles International Airport and it is nearly double the current state minimum of $8.
The union-backed hotel proposal was introduced by council members Mike Bonin, Nury Martinez and Curren Price, who said the city must do what it can to close a growing income disparity while also jump-starting the economy with what they said would be millions of dollars of additional spending by better-paid hotel workers.
Hotel owners and operators counter that the mandate would force them to increase prices, reduce staff or cut remodeling and amenities — particularly banquet service and restaurant hours. They said they've seen those results after higher wages were imposed in recent years on hotels in Long Beach and near LAX.
Caruso acknowledged there could be some adjustments for business and said the government should move cautiously. "Some of the costs will get absorbed by the businesses and some will get passed through to the consumer," he said. "But I think it's good for business in the long run. I think businesses should be able to absorb it and not worry about it."
Even members of the generally pro-labor council signaled in their initial hearing on the $15.37 proposal Tuesday that they might be looking for other approaches.
Councilman Jose Huizar, who represents downtown, noted the city center hopes to add at least 4,000 hotel rooms, many of which are likely to come from the "adaptive reuse" of older buildings. He asked that the economic study review whether such rehabilitation projects would be harmed by a higher minimum wage. Huizar also said he was concerned about smaller, boutique hotels that have been part of a downtown renaissance. He wanted the city's economic impact study to review whether the 100-room threshold for imposing the higher pay on hotels was the right one.
Councilman Gil Cedillo, a former labor organizer, did not object to the hotel proposal but suggested the city take "a more comprehensive approach." He said he planned to offer his own proposal, adding, "I want to talk about the entire city, not just one industry."
Broad, who made his fortune first in home construction and then financial services, said he thought that $15 an hour would "get people out of poverty and put more money into the local economy."
He said he has broached the idea with leaders of the Los Angeles Area Chamber of Commerce and other business associations, but heard their members were not receptive. "I told them it's time to get in front of the issue, because the unions will get something done anyway," Broad said.
Caruso, developer of The Grove and other shopping centers and nearly a candidate for mayor last year, said a state or federal increase in the minimum wage would "create a more level playing field," adding: "If you believe in raising the minimum wage, it should be raised for everybody, not just one economic sector."
President Obama and congressional Democrats have proposed hiking the rate to $10.10 an hour, but stand little chance of getting it past Republicans in Congress.
Caruso said his "gut reaction" was that minimum pay should be even higher, between $12 and $15 an hour. "It's very difficult to live in this region, or really anywhere else if you are trying to raise a family, on that kind of money," he said.
The mall builder said such thinking "started with Henry Ford, when he decided he would increase the wages of the people building his cars, so that they could afford to buy his cars."
He cautioned that Los Angeles should not go ahead with any wage requirement without also thoroughly revamping its gross receipts tax and streamlining regulations that he said discourage businesses from locating in the city.
One major business figure who supports the $15.37 proposal now on the table is Peter Lowy, co-chief executive officer of Westfield, the Australian company that owns four malls in the city. Lowy said in a letter to the council that his company had seen living wage ordinances work at LAX and that such laws help create "a level playing field."
A major complaint of hotel operators, however, is that the current proposal is not level, applying to just 87 hotels out of 360 citywide and excluding other industries or hotels in neighboring cities. "My concern is the targeting of an industry that creates an unfair advantage," said Mark Davis, general manager of the 489-room Hilton Los Angeles/Universal City. "It will benefit some workers, but what do you say to those who lose out?"
Opponents also suggested that Westfield's support of the hotel wage amounted to a political payback. Myriad unions spoke out in favor last year when the mall operator wanted a tax break from the city to help pay for construction of its Village at Westfield Topanga project. The company will get to keep 42% of the net new tax revenue generated by that project — an estimated $59 million over 25 years. The construction and new shops would, in turn, create hundreds of new jobs. The company's letter supporting the $15.37 hotel wage falls in line with the position of the unions that supported the tax break.
Lowy was out of the country and unable to comment, though his letter favoring the wage said the company practices what it preaches, "providing fair wages and good conditions for workers" at its developments around the city.