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Growing Profits at Workers’ Expense

July 14, 2014 By Lucas Franco, Graduate Research Fellow

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Tourism in Minnesota is a $12.5 billion dollar industry, and according to officials, the economic impact of travel & tourism in Minnesota ranks significantly higher compared to other states. The Twin Cities, Duluth and Rochester metropolitan areas are all showing strong signs of recovery from the Great Recession, but not everyone is benefiting from the gains.

Minnesota has one of the lowest unemployment rates in the U.S. at 4.6%. The housing market and commercial development sectors in the state are both showing strong signs of recovery. The hotel industry has had a robust recovery and is on track for another year of high earnings.

Despite these areas of optimism the recovery has not benefited everyone equally. The recovery has been particularly unequal in the Twin Cities region. A 2013 report published by the Metropolitan Council, “The Twin Cities in 2012: An Uneven Recovery”, uncovered the struggle low-wage workers in the region continue to face. In particular, hotel workers have seen little improvement in their working conditions. Increased profits have not led to improvements for low-wage workers in the industry.

The financial pressures of the recession led many hotels to cut back dramatically on staffing levels. Recovering profits, however, has not translated to new hiring. In a push for increased labor productivity the industry has increased the workloads for their employees. These pressures have led to greater injury rates throughout the industry, especially among housekeepers. These trends hold in other metropolitan regions throughout the state, as workers in both Rochester and Duluth face similar pressure.

The purpose of this report is to shed light on the hidden costs to workers that undermine the value of the industry for the greater Twin Cities, Duluth and Rochester metropolitan area economies. These are three critical economic hubs in our state. The findings draw attention to the relationship between hotel profits, worker pain and injury and the public subsidies we all provide that help to maintain the industry.

Some of the findings include:

  • Dramatic cuts in staffing levels have increased hotel profits, but they have led to a larger burden on hotel workers. In Minneapolis, for example, between 2008 and 2011 total revenue increased by 9%, yet total employment in the industry declined by 14%.
  • Earnings for hotel workers in the Twin Cities, Duluth and Rochester are at the bottom of the wage scale relative to a range of occupations that do not require a high school degree
  • Injury rates within the accommodation industry are higher than the construction and rail transportation industries.
  • The hardship faced by workers in the accommodation industry, especially in hotels, is disproportionately borne by women and people of color.
  • Low wages and relatively low medical insurance coverage rates for hotel workers means that these workers rely heavily on public subsidies, such as the supplemental nutritional aid program (SNAP) to get by.

The good news is that there is a better way that secures both good jobs and strengthens the industry. Through increasing our investments in workers, including pay, benefits, and training the “high road” policies and practices laid out in the recommendations section will help to develop an accommodation industry that is good for workers and for all Minnesotans.

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  • Dan Conner says:

    September 9, 2014 at 8:12 am

    While no one can tell a business when to hire or not, government can tell business how much they should pay.  No worker should have to work full-time in employment that can’t remunerate them above subsistence levels.  People should not have to work in poverty.  To avoid micro-managing businesses, maybe a law should be instituted when any business that GROSSES more than a certain dollar should pay workers a minimum of $xx.xx an hour.  If these employers insist on paying employees less, then they should be taxed an additional amount for reimbursing the State and the Federal Government for public assistance that must be given to people to help them subsist.

    This recommendation is based on GROSS earnings because a business is less able to manipulate that.