Troubling Signs of Minimum Wage Damage in Los Angeles

Adan Ozimek writes  for Moody's:

In September, 2014, Los Angeles City approved hike to the minimum wage for hotel workers of $15.37. The wage went into effect in July, 2015, for hotels with 300 or more rooms, and will go into effect July, 2016 for 150-plus-room hotels. Given the delay in the wage hike, it is not obvious that employment would be affected already. But BLS data on the accommodations industry (NAICS 721) for Los Angeles county is starting to look like serious impacts are occurring already.

The decline in year-to-year growth rates starts to show up in October, 2014, when growth falls below 2% for the first time in more than two years. Then in January, 2015, employment starts to actually shrink, and by June it is down 4.8% year over year. Zooming out, it’s clear that job losses of this magnitude in Los Angeles are not seen outside of recessions.

...The service sector, and hotels in particular, should be less responsive to minimum wage hikes than many other lower wage employers. Tourism industries should be less price elastic than tradeables like manufacturing, and hotels don’t have a lot of alternatives, which makes transitioning the building to some less-labor-intensive use less likely. Hotels, in other words, should have been more safe. Instead, they seem to be taking a big hit. While what we are seeing in Los Angeles so far is nowhere near conclusive, it should worry those who have been less concerned about big minimum wage hikes.

.-RW