Posted May 29, 2025 by Martin Armstrong 

California routinely selects groups of minimum wage workers and decides that their skill set is now worth tenfold. The state in general increased the minimum wage to $16.50 per hour on January 1, 2025, while certain cities have raised the minimum to $19 per hour. Lobbying efforts have prevented certain groups from seeing a drastic spike in minimum wage, but California has now decided that hotel and airport workers must be paid more than others.

Hotel and airport workers will receive a $2.50 per hour raise to $22.50 per hour at minimum, but that amount will rise to $30 per hour by July 2028. Additionally, employers must provide a $8.35 per hour health care stipend by June 2026. This means that payroll will increase by 69% in a two-month period. Low-skilled positions will now cost employers $38 per hour. The proposal will only give employers 60 days to adopt the new policy. “No industry can afford that financial uptick in such a short period of time,” the Hotel Association of Los Angeles stated.

Hotels are already struggling, experiencing only 79% of the traffic that they once enjoyed prior to the pandemic. The city shed 11,000 hotel jobs last year, and this proposal nearly ensures more jobs will be cut. This comes ahead of the 2028 Olympics that will be hosted in Los Angeles. Hotels have already agreed to room block agreements for the event prior to the announcement that minimum wages were to increase. “We agreed to certain rates at the hotels at that time, and it’s not viable for us to be able to agree to charge the same rates that we calculated based upon a $17 minimum wage that’s now going to be almost double that,” said Mitchell Hochberg, president of real estate investment firm Lightstone Group, which operates the Moxy and AC hotels in downtown Los Angeles—one of the properties withdrawing from the agreement.

Perhaps someone in the hotel industry should have donated to Newsom’s campaign. A fast-food bill was passed in September 2022 that set the minimum wage to $22 per hour for select chains with over 100 locations, later expanding to a $20 minimum pay for restaurants with 60 locations. California specifically exempts fast food establishments that contain bakeries, such as Panera Bread. Glenn Flynn is the largest fast food franchise owner in America with an empire of 2,600 restaurant locations that produce around $.45 billion in sales. Flynn, estimated to be worth around $1.1 billion, has strongly supported Gavin Newsom publicly since 2014, when Newsom was a lieutenant governor. Both men attended the same high school and have longstanding ties.

Bloomberg reported that Flynn donated $64,800 to Newsom’s personal re-election campaign and an additional $100,000 for conservative-led recall efforts. Flynn’s holdings in California only include two establishments – Applebee’s and Panera Bread. Applebee’s is exempt from the law despite its pre-frozen dishes since it is a sit-down restaurant chain. Panera Bread, on the other hand, is exempt due to this specific loophole that only excludes establishments that bake bread. This is what happens when lobbying is permitted and politicians are for sale.

Should a hotel maid earn more than a teacher in Los Angeles? Do the people constructing the hotel deserve less than those paid to book rooms? Does replacing towels and bedsheets or checking a boarding pass warrant an $80K salary? Pay grades are no longer based on skill and experience but on industry pandering. Businesses do not have the capital to provide every employee, regardless of their contribution to the company’s success, with large pay-outs, and many in Los Angeles are already discussing cutting their workforce, turning to automation, or simply closing their LA-based locations.

“We are seriously considering converting one of our hotel’s restaurants to a self-service breakfast model and closing at least one restaurant space at another property. The wage increase makes it difficult to sustain full-service operations,” Jon Bortz, CEO of Pebblebrook Hotel Trust, told reporters. The Hotel Angeleno plans to eliminate valet parking and close its restaurant as well, eliminating dozens of jobs.

The latest move by California to arbitrarily raise the minimum wage only for specific sectors such as fast food and healthcare is yet another blatant act of economic discrimination driven by politics, not sound economics. When you rig wages by legislative decree and apply those rules inconsistently across industries, you are manufacturing instability.

California is specifically targeting industries with low-skilled labor and deliberately forcing them to slim down their workforces in the name of “equality.” A minimum wage increase that outpaces productivity growth is inflationary. California is forcing small and mid-sized businesses to raise prices, cut hours, or automate, which ultimately harms the working class.