Wage issue shouldn’t end at L.A. hotel doors
For a guy in the hospitality business, Michael Gallegos has a funny knack for making enemies.
Gallegos is president of American Property Management Corp., which weeks ago broke ranks from a pack of hotels near Los Angeles International Airport to endorse a “living wage” for its workers -- $10.64 an hour without health benefits, $9.39 with them.
His stance not only drew the wrath of his fellow hoteliers; it didn’t please all of his employees, either. Some contend that he fattened their paychecks solely to try to keep them from unionizing the 570-room Sheraton Four Points, the largest hotel in American Property Management’s $1.5-billion portfolio.
Gallegos insists that his motives are pure. “Make no mistake about it,” he says. “It’s the right thing to do.” He also thinks the living wage “makes good business sense” -- a viewpoint often articulated by advocates for the poor, but not typically by those honored as an Ernst & Young Entrepreneur of the Year.
Indeed, whatever Gallegos’ aim -- and only time will tell how sincere he is -- it would be a shame if his ideas got lost in the deal announced Wednesday, which was designed to avert a divisive ballot referendum on the issue. Under a fragile peace engineered by Los Angeles Mayor Antonio Villaraigosa, a dozen hotels around LAX would still be compelled to pay the living wage to their 3,500 workers. But they’ve also had some sugar thrown their way in the form of public incentives for marketing and infrastructure improvements along Century Boulevard.
In addition, the new legislation would establish rigorous requirements that the city must follow if it wants to extend the living wage (heretofore reserved for municipal contractors) to other neighborhoods or industries. Business leaders say the upshot will be to halt the living wage from spreading any further. “This is a major point,” says Gary Toebben, president of the Los Angeles Area Chamber of Commerce, sounding as if some terrible cancer has finally stopped metastasizing.
But word inside City Hall is that the language being drafted won’t be so cut and dried. It will keep open the possibility of expanding the living wage -- as long as proper steps are taken to assess the economic effect of such a move. My hope, in fact, is that the fight at LAX prompts a robust debate over whether some kind of living wage should be imposed throughout L.A., as it has been in San Francisco, Washington, Albuquerque and Santa Fe, N.M.
And if this happens, Michael Gallegos should be among the first invited to weigh in.
The son of a cobbler who never made more than $5,000 a year, Gallegos used to park cars at the La Fonda hotel in Santa Fe as a kid. Seven siblings are now executives at American Property Management, including older brother Onofre, who oversees the Four Points. “We’ve never forgotten our roots -- or basic decency,” says Gallegos, 47.
In 1989, Gallegos found his way into real estate, and a single hotel venture quickly mushroomed into many more. Today, San Diego-based American Property Management runs 45 hotels, has 5,500 employees and pulls in revenue of $400 million annually. Privately held, the company won’t disclose its profit. But Gallegos notes that the enterprise is expanding rapidly -- something it wouldn’t be doing if earnings weren’t strong.
Building the bottom line, he adds, hasn’t come from being cheap. Rather, Gallegos says, the company’s success is the consequence of carefully considered investments -- including in its hourly workforce. The collective raise at the Four Points for 220 employees, some of whom were making $6.75 an hour before, will cost about $1.5 million.
The common refrain among businesses is that any mandated boost in wages will trigger a lot of layoffs. But the truth is, economists are divided on this. Considerable evidence exists that job losses from past increases in the minimum wage have been negligible, if that. What’s more, business owners may even discover some pluses from increasing compensation.
Gallegos has. For starters, he says, elevated wages translate into a more stable labor force. Although American Property Management doesn’t offer $10.64 or more to workers at all of its hotels, Gallegos says those at the Four Points deserve it because of L.A.’s high cost of living. More generally, the company prides itself on out-paying the competition wherever it operates. The result, Gallegos says, is that its turnover is less than half the industry average, and the company attracts better talent.
Beyond that, he finds a direct correlation between higher employee wages and higher customer satisfaction: “If you treat your people right, they’re going to treat the guests right.”
For some workers at the Four Points, it’s clear that the living wage has already made a huge difference. A bellman says that at $10.64, he can afford to quit a second job parking cars and go back to college part-time. A housekeeper, tears in her eyes, says she no longer fears running out of food before payday.
Some have questioned whether waitresses and others who rake in tips should receive the living wage. But Gallegos sees nothing wrong with pocketing both. “No one is going to get rich off the living wage,” he says.
Gallegos’ attitude certainly hasn’t pleased everyone. He says the other hotels around LAX have vowed not to send any spillover traffic his way. “They did not appreciate us stepping out of line,” he says.
Equally unhappy is Unite Here, the hotel workers’ union. Much of the friction stems from a boneheaded move that American Property Management made after it bought the Four Points in December. It let go 12 workers -- all of them, according to the union, folks who’ve been active in an organizing campaign at the hotel. After Assembly Speaker Fabian Nunez and other pols stepped in, they were rehired.
Gallegos says he is neither anti-union nor pro, but asserts: “I don’t think our people need a third party” to represent them.
One of those who’d been fired, Pricila Velazquez, complains that medical premiums have gone up since American Property Management has taken over. She also expresses doubt that the higher pay would last if it weren’t for the city’s intervention. And she argues that other enhancements the Gallegoses have pledged or made -- a new air system for the laundry room and a lighter workload for the housekeeping staff -- will prove fleeting. “We don’t believe the promises,” she says.
I’ve got more faith. But even more important, the company’s tussle with the union obscures what really matters: In a place such as L.A. -- where more than 10% of working people have incomes below the poverty line -- we should start talking about the living wage as a tool to help lift the poor, not just at a dozen businesses near LAX but all across the city.
When businesses protest, policymakers should take their concerns seriously and be open to appropriate exemptions and a phase-in schedule. But they’d also be smart to remember what one of the hotel industry’s rising stars has to say. “History,” Gallegos predicts, “will show we’re on the right side of this issue.”
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Rick Wartzman is an Irvine senior fellow at the New America Foundation. He is reachable at rick.wartzman@latimes.com.
