The Spread Is Very Healthy.

To My Partners:

Kellie is a housekeeper at the motor lodge I own outside Bakersfield — the chemical burn on her right forearm, the one you’d mistake for a birthmark, is from the bleach concentrate I buy in bulk. The concentrate costs $0.89 a gallon. The diluted version — the one that doesn’t scar — is $2.79. I save $1.90 per room per turn. Across 180 rooms, 300 days a year, that’s $102,600 I keep. Kellie’s skin bought it. I don’t pay her to attend to the burn. I pay her $17.25 an hour, the posted wage, and the posted wage buys the part of her that strips the bed. It doesn’t buy the part that heals. That’s not a loophole. That’s a discrete line-item, and I separate them with the care I was taught.

Ted Jenkin, writing in Fox News, has explained that the Los Angeles City Council’s plan to raise hotel and airport worker wages to $30 per hour is “fantasy land.” He owns six small businesses. He knows what margins are. I own eighteen, and I know what margins cost. He’s right about the arithmetic, but he’s wrong about the conclusion, which I’ll draw for him because he stopped one sentence too soon. Stay with me. I want you to learn something the business community already knows and refuses to say aloud.

Now let me show you the margin.

Renata is a body on my housekeeping roster at the hotel I own on Wilshire, between the Beverly Center and the part of the boulevard that looks clean from the lobby. She is fifty-one, and the good Lord saw fit to make her durable. Her knees are not what they were. The cart she pushes weighs more than she does and the rooms turn over in 19 minutes because I timed the rotation and I won’t pay for a second pair of hands on the floor. She earns $14.85. The proposed floor is $30. The gap is $15.15. Per room, at 26 turns, that is $0.58 in additional labor I’d have to find. 58 cents a room. The rate you paid was $279. 58 cents against $279. Say that number back to me. The arithmetic Jenkin refuses to do aloud is sitting right there, and he won’t say it because the moment he does, the word “fantasy” no longer describes the mandate. It describes the objection.

58 cents a room.

The linen service costs me $18.40 a room. The coffee pod on the desk costs me $0.12 and I charge you $3.50. The robe you admired was $14 to source and $95 on the honor-system tag. That’s margin, not operational cost. And the margin is the reason I bought the building.

And so the question is not whether a business can absorb $0.58 a room. It’s the one Jenkin won’t finish. It is whether the business can be made to absorb it when the people who own the business have spent 40 years proving they won’t, unless forced, and have found a columnist willing to call that refusal “common sense.”

Good. You’re counting. Let me teach you the rest.

The woman on the sixth floor who cleans the rooms I double-booked on the convention weekend — her name is Gloria and she’s been on my housekeeping roster for 4 years. I don’t know her last name. I classified her as a part-time seasonal because the hotel’s occupancy runs 72% annually, which means she works full-time 72% of the weeks and I owe her nothing for the other 28%. She hasn’t seen a doctor in 3 years. Her hands crack from the peroxide solution because the gentler formula costs $0.03 more per gallon and I have 340 rooms. The amortized cost of switching, $4.10 a month, is what I spend on the lobby orchid that faces the registration desk. I kept the orchid. I kept the $4.10. Gloria kept the chemical dermatitis and a schedule that shifts every Tuesday so she can’t plan a second job.

You stayed in the room she cleaned. The sheet was crisp. The mirror was streakless. The bath mat was dry and folded and it felt, for a moment, like care. That feeling costs me nothing.

Now. Here’s the part I want you to hold.

Jenkin says “businesses pay people more when they generate more value, earn more profit and compete for talent.” That’s the sentence he believes resolves the question. Let me show you what it means on my floor. Renata generates more value every year because the rate goes up and her wage doesn’t. Gloria competes for talent against the six other women I rotate through the sixth floor, none of whom know the others are also “part-time seasonal,” and the competition holds because the alternative is the street. The profit I earn on each room has increased 31% in 4 years. Renata’s wage has increased 4%. The gap — the part Jenkin calls “how free markets work” — is $9.87 a room, and I kept it, and I’ll keep it again.

Now.

The Olympic Wage mandate arrives, and Kellie’s wage goes to $30. Here is what I do.

The motor lodge runs on 8 housekeepers per shift. I cut to 5. The rooms get 18 minutes instead of 22, and the corners don’t get vacuumed. I don’t notice. You don’t notice. The floor is still clean in the picture you leave on the review site. The 3 women I let go — Tania, Rosa, Kristin — lose their hours. One will stay in Bakersfield and take worse work. Two will leave for Arizona, which has a lower floor and a higher tolerance for what I do. I am sad to lose Tania’s forearms, which were very fast, but I am not a collector of forearms. I am a collector of the gap between what the shift costs and what the room brings in, and the gap is comfortable at 5 workers. The mandate made the gap narrower per worker, so I made fewer workers. This is not retaliation. This is arithmetic.

Now pull back with me, because this is the part I want you to learn.

The argument Jenkin is making isn’t new. It’s the argument that has been made against every wage floor since the 1834 Poor Law Commission determined that relief to the indigent must be rendered less desirable than the worst available employment. Nassau William Senior, who helped draft that Commission’s report, called the principle “less eligibility.” The doctrine was precise: if the workhouse is comfortable, no one will work for the wage you wish to pay. The cruelty was not a side effect. It was the design specification. Jenkin is Senior’s grandson, trading the workhouse for a press release. He doesn’t know this, which is the part I find most amusing — he’s reinvented the 1834 principle and dressed it in the language of a LinkedIn post, and he thinks he’s arguing for freedom.

John C. Calhoun said it for me on the floor of the Senate in 1837, in language that has never stopped being useful:

“I hold that in the present state of civilization, where two races of different origin, and distinguished by color, and other physical differences, as well as intellectual, are brought together, the relation now existing in the slaveholding States between the two, is, instead of an evil, a good — a positive good.”

Calhoun said the arrangement was a positive good. Jenkin says capital is mobile. The vocabulary changes. The load-bearing wall does not.

“The master allows the slave to retain a sufficient amount of the proceeds of his labor to sustain him in a reasonable degree of comfort.” That was George Fitzhugh, Cannibals All!, 1857. He was pricing a different kind of body on a different kind of floor, but the arithmetic is the arithmetic. The wage is the part of the worker the employer agrees to count, and the counting has always left a remainder.

And I’ll tell you something Jenkin won’t, because he can’t afford to and I can. I’ve done the arithmetic on the $30 floor. At $30 an hour, Renata earns $48,000 a year. At that wage, she qualifies for none of the public assistance she currently receives — not Medi-Cal, not Section 8, not the food benefits that keep her children fed while she changes your sheets. The state of California currently subsidizes the difference between what I pay Renata and what it costs her to be alive. Your taxes do that. I do not. The $30 mandate isn’t, as Jenkin suggests, a tax on business. It’s the end of a subsidy to business — my business — and I’ve been collecting it for 4 years, and the subsidy is $4,800 a year per housekeeper, and I have 38 of them.

I want to pay Tuesday’s shift, and the shift costs less than the woman. The shift is what I buy. The woman is what the shift costs.

The laborer is worthy of his hire. Luke 10:7. Not what he needs. Not what it costs to be warm and fed and whole. What he’s worth. And I determine worth. The Bible left that part out — the word “worth” is an empty room, and I’m the one who does the hiring. I’ve furnished the room with a woman who can’t afford to quit and a bleach that scars. Someone is paying the difference. I’m not looking into who, and I don’t need to, because the margin is the margin and the margin is what is real.

The towel Kellie folded, the one you dried your face with this morning at the motel off the 5 — her hands pressed the crease into the cotton. You put your face where her burn was.

The quarterly number I sent to the partners who own the shell that owns the building is exquisite. Capital improvements: $340,000. Headcount optimization: 3 positions. Margin: +2.8%. The summary is a document about money. I closed the attachment and poured a drink.

The Olympics arrive in 2028 and Los Angeles will fill every room I have. The wage will rise, and I will cut the roster; and when the tourists leave, I will cut the wage quietly through a contractor who classifies Kellie as an independent agent and pays her $22.50 before fees. You will stay in the room and notice nothing. The sheet will still be crisp. The person who made it crisp will still not be able to afford the room. That is not a leadership problem. That is a design feature. And I am, on the whole, content with how it’s performing.

The spread is very healthy. I remain, as always, yours in the arithmetic of extraction.

S.A. Varice Principal, Bakersfield Hospitality Partners

Sterling A. Varice holds the Hayek-Friedman Chair and serves as Dean of Instruction at Warden University’s College of Business and Economics in Richmond, Virginia. He is the author of three textbooks: Divine Mandates for Labor Utilization, Social Obligations for Profit Maximization, and Calibrated Deprivation: A Manager’s Guide to Employee Motivation.