The thing driving layoffs at Los Angeles hotels isn’t the $30 wage floor. It’s the mortgage payment. In “LA politicians want to mandate prosperity. The $30 minimum wage proves they can’t”, business owner Ted Jenkin, writing for Fox News, argues that forcing hotels to pay their workers more will kill the industry — that wages come from success, not mandates, and that reality always gets the final vote. He’s right that reality votes. He’s just reading the wrong ballot.
I’ll grant him the clearest point first. A $30 wage floor is a sharp increase, and if you are running a small operation on a tight margin, a sudden jump in labor costs really does force a hard choice. The author’s own small businesses are not the target here — he is right that a single franchise owner can’t just eat a mandated wage hike without adjusting something. I believe him when he says his margins are real. The man wants the government out of his business. I’m sure he also opposes the zoning that protects his hotel’s view and the FAA that keeps a plane from landing on it.
Walk with me to the books. A hotel takes in money from rooms, food, parking. It pays the housekeepers, the light bill, the laundry. Whatever’s left is operating income. Notice what we haven’t paid yet: the mortgage. That comes next. And in the hotel business, the mortgage is the thing that eats everything. The mass layoffs, hiring freezes, and renovation delays Jenkin cites are real, but he stops reading one line too early. The money that was supposed to keep the bellman employed isn’t disappearing into the wage bill. It’s going to debt service, management fees skimmed by the parent brand, and the rent the operator now pays on a building that used to be owned outright. In a sector where every major acquisition is financed with borrowed money, and where sale-leaseback is the standard playbook, the mortgage is eating the operating income. The author never mentions the debt. That’s the tell.
Anyway.
Now follow the money one step further. The author insists that capital is mobile and that investors are fleeing to low-tax, low-regulation states. I don’t doubt that some are. But a hotel can’t move. A hotel room at LAX cannot be loaded onto a flatbed and hauled to Nevada. The hotel’s value is pinned to the concrete of Los Angeles. The only thing that can pack up and leave is the franchise flag on the marquee or the equity fund in the boardroom, and when they leave, they do so because the yield on their leveraged buyout no longer pencils out — not because the housekeepers are making thirty dollars an hour. If a business model collapses because the people who clean the rooms can suddenly afford rent, the model was not a business. It was an extraction operation sitting inside a building. The author’s version of capitalism requires a permanently precarious workforce to keep the numbers black. That is not free enterprise; it is a subsidy from the bodies of low-wage workers.
The piece also drags in a familiar bogeyman: the bankruptcy of a fast-food franchise and a study from UC Santa Cruz to argue that California’s $20 fast-food wage is already destroying jobs. I’m supposed to see one bankruptcy and conclude the whole wage is a failure. The federal minimum wage has been stuck at $7.25 since 2009. In that time, corporate profits have reached record shares of national income and the ratio of CEO to worker pay has ballooned past 300-to-1. Wages stagnated for decades while productivity kept climbing. The gap between what workers produced and what they were paid didn’t evaporate. It was captured. The real wage compression Jenkin should be worried about is the one that happened in the other direction, over forty years, without a single city council vote.
So what do we build on the ground where the “mandate prosperity” fable stood?
We stop pretending that a phased-in wage floor is the sole variable driving a hotel’s viability, and we start looking at the capital structure. A serious policy would pair a wage standard with a requirement that the city’s financial disclosures show how much of a hotel’s revenue goes to debt service and franchise fees. Let the industry show its books. If a hotel owner claims the wage is the killer, they should have to prove it isn’t the leverage.
Second, we build the counterweight. A sectoral wage board for the Los Angeles hospitality corridor — hotels, airports, food service — would let unions, employers, and the city negotiate one standard for the whole industry, rather than fighting it out hotel by hotel. That eliminates the free-rider problem where a non-union operator undercuts the union house by starving its staff. It makes the wage the floor for everyone, not a competitive disadvantage for the ones who signed a contract.
Third, we change who owns the hotel. Los Angeles is full of workers who have spent decades making beds and carrying luggage. A cooperative conversion fund, seeded by the city’s own tax revenue or a small surcharge on the Olympic broadcast rights, could help a group of workers buy out a struggling franchise and run it themselves. A worker-owned hotel doesn’t need to extract a double-digit return for a distant equity fund. It needs to cover its costs, pay a decent wage, and put the surplus into the building and the members’ capital accounts. That is not a socialist fantasy. It is the legal structure of the credit union in your wallet.
The economy is a set of choices, not the weather. Los Angeles can choose to keep running an extraction machine that strips wages to pay lenders, or it can choose to require that the capital structure justify itself before we believe the line that a housekeeper’s paycheck is what’s breaking the bank. The author is right that reality always gets the final vote. The reality here is that the profit is real, the debt is real, and the wage is the only thing that has been negotiable. It doesn’t have to be.