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Increase in minimum wage could produce negative outcome

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Corrected as of June 4, 2014

As the discussion of raising workers minimum wages has; at times, then loudly debated, yesterday, Seattle, Washington's City Council approved an increase in the city's minimum wage, raising it to $15 an hour, one of the nation's highest wages. The increase will take place over several years, with the first increase being on April 1, 2015 and the last increase happening in 2017. This increase in minimum wage will affect only the City of Seattle, which Mayor Ed Murray will sign into ordinance today. The State of Washington already has the nation's highest state level minimum wage at $9.32.

Because Seattle is one of the few cities or states that has implemented an annual minimum wage increase tied to inflation, the affects of such a increase might not have as big an impact on businesses and workers as states without annual increases. To prove this point, the American Hotel & Lodging Association (AH&LA) and the Asian American Hotel Owners Association (AAHOA) released yesterday a new national study on the impact of high minimum wage increases on the U.S. hotel industry. This study points out that, there would be a greater negative outcome on the smaller employers in the lodging industry.

The study, “Extreme Wage Initiatives and the Hotel Industry: Impact on Local Communities and the Nation,” was conducted by John W. O’Neill, Ph.D., director of the school of hospitality management at The Pennsylvania State University, focus first on the call for a $15.37 per hour increase as proposed for the Los Angeles area. According to the study, an increase of this size in Los Angeles would result in:

  • A total job loss of 1,394 hotel staff positions;
  • A loss of $106.1 million in annual guest room revenue;
  • $16.4 million in lost hotel occupancy taxes;
  • $2.9 million in lower corporate taxes; and
  • A loss of $20.1 million in hotel values.

Second the study focused on the call for a national minimum wage of $10.10 per hour, as proposed by Sen. Tom Harkin (D-IA) and found it also could have a bigger negative impact on the lodging industry:

  • A total job loss of 12,195 hotel staff positions;
  • A loss of $612.3 million in annual guest room revenue;
  • $70.4 million in lost hotel occupancy taxes;
  • $146.2 million in lower corporate taxes; and
  • A loss of $1.02 billion in hotel values.

The study might pertain to the lodging industry but other industries have also stated that extreme increases to minimum wages, at this time, would have deep negative effects on jobs, cost in doing business and would produce huge economic losses for cities and states.



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