Los Angeles’ Minimum Wage Hike Sparks Debate Over Economic Impact
Los Angeles has taken a significant step in raising the minimum wage for workers in the tourism industry, but the move has sparked intense debate among business leaders and economists. The city’s recent decision to increase the hourly minimum wage for hotel employees is set to reach $30 by 2028, with gradual increases over the years. This policy change has drawn considerable criticism from local hotel owners and business groups who argue that it could have unintended negative consequences.
The Los Angeles City Council approved the ordinance in May, which requires hotels to incrementally raise their minimum wage until it reaches the targeted amount. However, this proposal has faced strong opposition. A coalition of hotel owners launched a petition in June to challenge the new regulation, citing concerns about job losses and other “dire” economic impacts. The petition has already gathered more than 140,000 signatures, surpassing the required number to place the issue on California’s 2026 ballot. If successful, residents will have the opportunity to vote on whether to revoke the ordinance.
Will Swaim, president of the California Policy Center, warned that implementing the wage hike could lead to several issues. He explained that businesses typically respond to sudden increases in labor costs by raising prices, reducing employee hours, or even laying off staff. Swaim also highlighted the potential for increased automation and other cost-saving measures, which could further reduce the need for human labor.
“Hotel owners and operators will follow the familiar path blazed by all businesses in the face of arbitrary increases in the minimum wage: They’ll raise their rates – and that will drive away lower-income visitors and reduce the need for labor,” Swaim said. “Hopings to reduce labor costs, they’ll turn to automation and find other labor-saving efficiencies. That will lead to reduced hours for employees and even layoffs.”
The implementation of the wage increase was scheduled to begin on July 1, but it has been temporarily halted while officials determine if the petition meets the necessary signature requirements. According to the National Law Review, the city clerk is currently reviewing the petition to confirm its validity.
Swaim emphasized that many politicians who claim to support working people may not fully understand the long-term implications of such policies. “You’d think the politicians who claim to be most concerned about working people would find all of this – the automation, the reduced hours and layoffs, shutdowns and corporate concentration – they’d find all of this horrific,” he said. “But in talking with them, it’s clear they believe the problems will take months or even a year or two to really emerge, and by then it will be some other politician’s problem.”
Hotel owners in Los Angeles have expressed concerns about the financial burden of the proposed wage increases. Jon Bortz, CEO of Pebblebrook Hotel Trust, told the Wall Street Journal that the company would like to sell its properties in the area, but noted that no buyers are interested. This suggests that the higher labor costs could make it difficult for smaller hotel operators to remain competitive.
On the other hand, some economists argue that the wage hike could stimulate economic growth. David Roland-Holst, an economist hired by Los Angeles to assess the impact of the proposal, stated that while some job losses might occur, the higher wages could serve as a “potent tool for economic growth.” He also predicted that the policy could create 6,000 new full-time jobs in the city by 2028.
Roland-Holst added that there is no empirical evidence of massive layoffs in response to minimum wage increases in California. However, hotel owners have raised concerns about the potential impact on major events like the 2028 Summer Olympics. In December, some hotel operators threatened to withdraw from a deal to provide rooms for the event if the wage increase was approved. Swaim explained that this could lead to higher room rates for visitors and long-term challenges in finding affordable lodging.
“This is how California routinely kills entire industries – fast food, gasoline, housing, farming, insurance and more,” Swaim said.
As the debate continues, the outcome of the petition will play a crucial role in determining the future of the minimum wage policy in Los Angeles. Meanwhile, the city’s leadership remains silent on the matter, with Mayor Karen Bass’ office not responding to requests for comment.
