Minimum Wage Hike May Be Applied to San Jose Rental Car Employees

Via Tripso Daily the San Jose Airport Commission has voted to recommend to the city council that airport rental car company employees be subject to the city’s ‘living wage’ rules.

    The average wage for the 700 or so employees is reportedly $7.50 an hour. Under the city’s living wage policy, the workers would make a minimum of $11.11 without benefits, or $9.66 an hour with benefits.

The actual impact of minimum wage rules is always hard to predict. Increasing the minimum wage doesn’t always lead to unemployment as critics would suggest, often because the prevailing wage is already higher than the minimum wage. For instance, increasing the federal minimum wage to $6 wouldn’t have a tremendous impact on rental car employees at the airport, since their average wage is already more than that.

At the same time, minimum wage rules often change who is employed. Higher wages often mean that companies are keeping for more productive employees, especially when an employer is subject to wage rules that surrounding businesses are not. If airport rental companies have to pay a higher minimum wage than other San Jose businesses, they’ll attract more job applicants and skim the cream of the labor pool crop. That comes at a cost to workers in the existing lower wage pool.

(This understanding was put into practice in South Africa under apartheid, where minimum wage rules were used to reduce black employment and transfer jobs to White Europeans.)

The living wage policy could cost rental car companies $6 million to $12 million a year, and the companies are looking at moving off-site outside the rule’s jurisdiction. Not mentioned in the article, some companies may leave the market. That change could allow higher rental car prices to prevail, fewer cars rented, fewer people employed, and any number of other results.

Still, predictions of doom may not come true at all, especially in a growing economy where the prevailing wage may well reach the level of any mandated increase.

What I find most bizarre is how this rule is applied:

    In 1998, San Jose became one of the first Bay Area communities to establish a living wage policy.

    The general philosophy at the time was that the living-wage policy would cover private companies working under city contracts for which the city could potentially assume responsibility itself, Mr. Manheim says.

    As a result, the airport’s restaurant workers and retail store employees are covered by the city’s living-wage policy while car rental employees, taxi drivers and airport shuttle drivers are not, he says.

    “The rationale is that the city does sell food, like in Kelley Park, but . . . the city would never rent cars,” Mr. Manheim says.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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