(Edit) Soluion Journalism Spring 2022: Wages for workers: economic inequality in the tourism industry

Part I: The Issue

Member of the Krewe of Rex during a Mardi Gras parade. Photo By: Flickr

New Orleans has long placed economic emphasis on its tourism industry. As early as the post-Civil War era, city leaders capitalized on the city’s unique geography, history, architecture, and diverse population to market the city as an alluring destination for tourists of all demographics and interests. On the one hand, New Orleans’s early 19th-century economic success as the antebellum South’s trade sector generated great wealth among the upper echelon of society. The city’s opulent elites romanticized the preservation of an “Old South” image, and Mardi Gras quickly became a way for these elites to establish exclusive social orders known as krewes within which they designated “royal courts” that reinforced traditional race and class hierarchies (Stanonis 15-16).

On the other hand, the city’s heavy Spanish and French cultural influence gave it a licentious and exotic reputation that allured tourists who wished to indulge in less virtuous activities. From 1897 to 1917, Storyville was recognized as the city’s official red-light district, offering visitors around-the-clock access to a slew of hedonistic pleasures – brothels, bars, and gambling dens lined the streets, and blue books promoted sex workers by name, address, race, and the service they provided.

In the years following World War II, New Orleans’s tourist industry experienced a massive boom. During this time, the jazz scene gained recognition through the establishment of Preservation Hall and the Jazz and Heritage Festival; newly-established Mardi Gras krewes departed from their original role as haughty and elitist men’s clubs, utilizing celebrity culture and flashy floats to attract the attention of visitors; and local politicians began to capitalize on the city’s unique tourism potential. By the mid-twentieth century, the city had come to depend on its tourism industry for economic benefit. As historian J. Mark Souther states in his book New Orleans on Parade: Tourism and the Transformation of the American City, “If Mayor Moon Landrieu had seen tourism as an industry his administration could stimulate to ease the burden of the shipping and oil industries in steering economic development, [Sidney J.] Barthelemy was the first New Orleans mayor to view tourism as the city’s only hope of fighting urban decay” (Souther, 185).

After the breaking of levees due to Hurricane Katrina in 2005, economic and political leaders in the city turned to the tourism industry to bolster economic regrowth. In a press release published one year after the storm, New Orleans & Company (Formerly the New Orleans Convention and Visitors Bureau) claimed that the tourism industry was “leading the city’s recovery by providing 35 percent of the city’s operating budget.” In just a decade, the tourism industry made a substantive recovery – in 2014, the local economy gained $6.8 billion from visitor spending, up almost 2 billion dollars from pre-Katrina visitor spending levels. In 2019, the year prior to the onset of the Covid-19 pandemic and just 14 years after Katrina, a record 19.75 million visitors spent approximately $10.05 billion in the city.

Tourists enjoying Bourbon Street in New Orleans. Photo By: Flickr

But despite the city’s heavy reliance on the tourism industry as an economic driver, the wage workers that drive the tourism industry are alarmingly underpaid. In fact, a 2015 Brookings Institute analysis found that the tourism sector was the city’s number one driver in job growth from 2010 to 2014, but the average annual salary figures of those employed by the tourism industry proved that it was the least lucrative major New Orleans industry for employment. While the actual number of individuals working in the tourism industry is disputed – varying opinions on the difference between local-serving industries vs. tourist-serving industries lead to different entities advertising vastly differing data – one thing is certain: the tourism industry is invaluable to the city’s economy, and it is here to stay.

In December 2018, The Data Center, an independent nonprofit dedicated to the data-based analysis of political issues affecting Southeastern Louisiana, published a report entitled “Benchmarking New Orleans’ Tourism Economy: Hotel and Full-Service Restaurant Jobs” dedicated to providing a comprehensive economic analysis of New Orleans’s tourism industry. To interpret the impact that low wages have imposed on the tourism sector, The Data Center utilizes the MIT living wage calculator, which uses local and regional data on typical expenses to estimate the wage rate required to provide residents with a minimum standard of living, to estimate the minimum wage required to support New Orleans’ working class. When The Data Center published its 2018 report, the calculator demonstrated that a single adult living in New Orleans with no children would require a $15 hourly wage to support themselves; as of 2022, this number has increased to $17.04 per hour.

The majority of employees in the industry can be divided into two primary clusters: those who work in the restaurant industry and those who work in the hotel industry. In 2017, New Orleans boasted 564 full-service restaurants that cumulatively employed 14,804 people (Habans & Plyer, 6). The average full-service restaurant job has an annual earning of just $29,464 including tips, amounting to $14.73 per hour (Habans & Plyer, 6). This means that of all w

Commander’s Palace, one of many full-service restaurants in New Orleans that serves as a tourism hotspot. Photo By: Ron Rousseau

orkers employed by New Orleans’ full-service restaurants, only 7 percent hold positions that pay more than or equal to the 2018 living wage of $15 per hour; even fewer meet or surpass the current living wage (Habans & Plyer, 6).

In the same year, New Orleans’ 161 hotels employed 11,647 people (Habans & Plyer, 2). Because the industry offers jobs at a wider range of wage levels than the restaurant industry, the annual average earnings are significantly higher than those in the restaurant industry, averaging $41,623 per year (Habans & Plyer, 2). However, this significantly elevated number is somewhat of an illusion – despite an average that makes the hotel industry appear more lucrative for the worker, three-fourths of hotel industry employees still held positions with median hourly earnings under the proposed $15 living wage (Habans & Plyer, 2). This discrepancy lies in the fact that hotel administration jobs, while making up a very small proportion of the hotel industry’s employees, are typically quite profitable, driving up the appearance of the industry’s overall average pay (Habans & Plyer, 3).

Part II: The Solution

In proposing a solution for the wage inequality in New Orleans’s tourism industry, it is important to consider the many social, cultural, political, and economic factors that make New Orleans so distinct from other cities in the United States. To best accommodate the city’s unique characteristics, I will assess examples of poverty-reduction tactics employed by several cities around the country and apply these findings to the unique cultural, economic, and political contexts of New Orleans.

Case Study #1: Seattle, Washington

In brainstorming different ways to combat the rampant poverty among employees of the New Orleans tourism industry, one obvious solution immediately came to mind: raising the city’s minimum wage to match the MIT living wage calculator’s suggestion of $17.04 per hour. Upon first consideration, this solution seems foolproof: the simple implementation of straightforward legislation could allow tourism workers to greatly improve their quality of life. As a bonus, a blanket raising of the minimum wage would not just positively impact hourly wage workers in the tourism industry, but also hourly wage workers across every economic sector. But the plan almost seems too simple – if raising the minimum wage is as straightforward as it seems, then why has it not been done?

In order to better understand the implications of a citywide minimum wage boost, I turned to a city whose early adaptation of progressive minimum wage laws has been scrupulously researched, providing a solid baseline for what could happen if this idea were to go into effect.

The Seattle skyline. Photo By: Ron Masters, Flickr

In 2015, the city of Seattle enacted legislation that would phase in a $15 minimum wage for companies with more than 500 employees by 2017, with the increased wage catching up to companies of all sizes by 2021. As of January 1, 2022, Seattle’s minimum wage has increased again to $16 an hour for companies with over 500 employees, while smaller companies have stagnated at the originally-proposed $15 an hour.

Of all major cities in the United States, Seattle has many factors that make it the prime candidate for trailblazing progressive economic strategies. First, Seattle is already a very wealthy city: according to the Census Bureau, the city’s 2016-2020 median household income was a whopping $97,185 – more than twice the median household income of New Orleans. In addition to its economic cushion, Seattle has long been at the forefront of progressive politics. In fact, Kshama Sawant, the Seattle City Councilwoman who spearheaded the initiative for the $15 minimum wage, is an outspoken member of the Socialist Alternative Party.

Seattle quickly found that the policy had its flaws. Even though Seattle boasts the highest minimum wage in the nation, the city’s cost of living still outpaces the wage: according to the living wage calculator, a one-member household in Seattle requires an income equivalent to $20.01 per hour to meet the city’s minimum standard of living. The initial hike in wages rattled the equilibrium of the low-wage job market, and in many fields of work increased wages meant decreased hours. One study even found that following the jump from $11 in 2015 to $13 in 2016, hours were cut by 6-7 percent while hourly wages only increased by 3 percent, resulting in a net loss of income for the wage worker. However, a follow-up study conducted a year later found that this may have been attributable to a multitude of economic factors, finding that low-wage workers overall experienced more rapid hourly wage growth than before.

While the new minimum wage isn’t perfect, most of the concerns raised by its opponents have proven to be nonissues. Although restaurant owners worried that higher wages would drive their restaurants into work shortages, the Bureau of Labor Statistics reported steady job growth in Seattle’s restaurant industry from the enactment of the new minimum wage until the onset of the Covid-19 pandemic. Seattle’s increase of its minimum wage may not have had the grandiose effect that its biggest proponents may have dreamed, but it provided Seattle’s economy with a net positive benefit.

Unfortunately, this research’s application to New Orleans is stymied by a hard truth: Seattle and New Orleans are hardly comparable cities, making it difficult to use Seattle’s experience to predict what may happen in New Orleans. Even before its minimum wage increase, Seattle ranked as one of America’s wealthiest major cities; New Orleans consistently ranks among the poorest. Seattle is a relatively young city; New Orleans is one of the country’s oldest. Seattle is nestled comfortably in one of the country’s most progressive states; New Orleans resides in one of the more conservative. The cities have wildly different climates, populations, cultures, and politics. With so many factors driving the two cities apart, it is hard to draw a feasible comparison without more consideration.

Case Study #2: Miami, Florida

Although researching Seattle’s progressive minimum wage provided a good start to learning about simple poverty reduction strategies, it left me wondering what measures have been taken by cities that are comparable to New Orleans.

In many of the ways that Seattle and New Orleans are different, Miami and New Orleans are similar. Although Miami is a newer and wealthier city than New Orleans, the two cities face many of the same issues: their salacious reputations make both cities popular among rambunctious tourists, and their tropical climates make them popular with hurricanes.

Miami’s skyline at night. Photo By: Alan Greenberg, Flickr

However, the two cities may be too similar for their good: in terms of inspiring policy to help bring the low-wage workers of the tourism industry out of poverty, Miami’s hourly wage workers, especially those in the tourism industry, generally face the same problems as their counterparts in New Orleans. Still, I decided to investigate the city’s stance on minimum wage.

In 2020, The state of Florida passed an amendment that oversees the incremental increase of the minimum wage from its longstanding $8.65 per hour to $15 per hour by 2026. The amendment, which took effect on September 30th, 2001, has not yet had enough time in action to yield substantial results, either positive or negative. However, the relatively slower incremental increase, which adds $1 to the wage every year until it reaches $15, may be a better-received implementation of a raised minimum wage in a less progressive state.

Part III: The Implementation

The City of New Orleans is no stranger to the minimum wage debate: At the end of 2021, the New Orleans City Council ratified a plan to raise the minimum wage for city workers to $15 an hour, citing the city’s desire to “set the tone for equity” as a driving factor in their decision. Given that the city is supportive of wage-increasing initiatives for employees in the public sector, it should not be difficult to garner support for the same initiatives in one of the city’s most integral economic sectors.

In implementing poverty reduction strategies in any area, and especially in a city as community-oriented as New Orleans, it is imperative to involve the voices of the primary stakeholders – the laborers who would be most affected by these potential programs. Local activist groups, like the economic justice organization Step Up Louisiana and the local chapter of the national hospitality union Unite Here, have worked together in the past to organize protests for an increased minimum wage. By involving these organizations in the implementation of economic initiatives, the workers will feel empowered and the policymakers will be more informed on how to best aid impoverished laborers.

Members of economic justice group Step Up Louisiana. Photo By: Courtesy photo, Step Up Louisiana

New Orleans’s struggle with poverty is not restricted to those in the tourism industry: According to US Census Data, the median household income (in 2020 US Dollars) from 2016 to 2020 was $43,258, far below the national median income of $64,994. Furthermore, 23% of New Orleans residents live in poverty, a startling statistic when compared to the national poverty rate of just 11.4%.

Similarly, the tourism industry’s struggle with poverty is not an issue localized to New Orleans. One study published in the academic journal Tourism Management found that tourism industry workers receive the lowest wages of any labor sector in the nation (Dogru Et. Al.)

While raising the minimum wage for hourly employees in the tourism industry will not eliminate economic disparities among hourly workers, this policy offers a straightforward starting point for an issue that ultimately requires a far more complex and multifaceted approach than I can tackle in one article.

Sources Cited:

Dogru, Tarik, Sean McGinley, Nathan Line, Peter Szende. “Employee earnings growth in the leisure and hospitality industry.” Tourism Management. Volume 74, 2019, Pages 1-11, ISSN 0261-5177, https://doi.org/10.1016/j.tourman.2019.02.008.

Habans, Robert and Allison Plyer. “Benchmarking New Orleans’ Tourism Economy: Hotel and Full-Service Restaurant Jobs.” The Data Center, Published Dec 07, 2018

Souther, J. Mark. New Orleans on Parade. LSU Press, 2006.

Stanonis, Anthony J. (Anthony Joseph). Creating the Big Easy: New Orleans and the Emergence of Modern Tourism, 1918-1945 / Anthony J. Stanonis. University of Georgia Press, 2006.