Is raising the minimum wage enough to address the racial wealth gap for service workers?

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Hospitality workers in New Orleans fight for better wages

New Orleans hospitality workers, many of whom are people of color, fight for better wages in a city built on tourism

Michael DeMocker, Jeremiah O. Rhodes, Nashville Tennessean

This story is part of Confederate Reckoning, a collaborative project of USA TODAY Network newsrooms across the South to critically examine the legacy of the Confederacy, Reconstruction and the Jim Crow era and their influence on communities today.

Raising the minimum wage is often touted as the primary solution for closing the racial wealth gap. However, it is not the only solution being explored in cities like New Orleans, where 31% of Black residents live in poverty — compared with 10% of white residents. 

In recent years, some New Orleans hospitality workers have fought to unionize, which has been effective in Las Vegas, another tourism dependent city. In 2014, the national hospitality union, Unite Here, led efforts to unionize Harrah’s Casino in New Orleans. To this day, it remains the only unionized casino in Louisiana.  

Other hospitality and tourism industry leaders have examined raising wages to address racial pay equity in their workplaces. In New Orleans’ food and service industries, people of color work most often in low-wage positions.

Café Reconcile, which operates as a restaurant and workplace training program for youth, worked with an equity consultant to diversify its leadership team over the last year. The organization, established in 2000, offers training to residents ages 16 to 24, who want to work in New Orleans’ hospitality industry. Approximately 95% of program participants are Black, said Gerald Duhon, Café Reconcile’s executive director.  

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As part of its training program in 2019, Café Reconcile eliminated tipping and instead introduced a rule that every staffer would earn at least $15 an hour plus benefits. Currently the highest base salary earned at the restaurant is $22 an hour. 

Duhon said the impact of the pandemic and last year’s social justice protests following the murder of George Floyd pushed them to re-assess how they could better support participants after they leave Café Reconcile. The National Restaurant Association estimates 110,000 restaurants have closed during the pandemic. And not unlike other sectors hardest hit by the pandemic, this disproportionately impacted communities of color. 

Duhon said the shift they are considering could include partnerships with local colleges to provide certifications in other leading industries, such as the Port of New Orleans.

 “I see us leaning in this direction in the next two to three years. We want to start allocating resources to what happens after the pandemic,” Duhon said. 

The minimum wage has ‘become a symbol’

At the state level, attempts to increase the minimum wage have not garnered broad political support. Over the last decade, 43 bills mandating a minimum wage increase have failed in the Republican-controlled state legislature, according to the non-partisan Louisiana Budget Project. 

The Louisiana Restaurant Association has lobbied extensively against a higher minimum wage and paid leave. The state is one of 20 in the country without a state minimum wage above the federal level of $7.25.

Hospitality workers: How the New Orleans tourism industry perpetuates its glaring racial wealth gap

“The minimum wage has really become a symbol,” said Robert E. Hogan, a political science professor at Louisiana State University. “It’s a way of signaling to potential businesses that, hey, we are a low regulation environment where labor is not very expensive.” 

The original version of President Joe Biden’s American Rescue Plan would have raised the federal minimum wage from $7.25 per hour to $15, the first increase since 2009.  

The wage increase was eventually stripped from the final COVID relief bill, but had it gone into effect roughly 40% of the New Orleans’ hourly workers would have benefited, estimates Tulane University economics professor Patrick Button. 

After COVID-19, could higher wages become the norm?

And yet, as the pandemic wanes and businesses try to rehire, New Orleans businesses have found that workers may not return for less than a living wage. Restaurants in particular have struggled to find staff. Some owners and politicians claim the $300 supplement to unemployment has kept workers from seeking jobs. 

“When I hear, we can’t get enough people in to work, I think two things: how much did you pay before and how did you treat people,” said Duhon, who noted he was able to retain staff at Café Reconcile despite the downturn in business during the pandemic. 

Others point to a lack of childcare, lingering safety concerns about COVID-19 and workers who made the decision to leave the hospitality business due to low wages, late hours and stressful work environments. 

Polly Watts, who owns the New Orleans craft beer bar Avenue Pub, found she had to raise pay to find staff. Before the pandemic, the starting pay for her kitchen staff was $12 per hour. To find the quality of staff she wanted, she now starts kitchen workers at $20 per hour. 

She can pay those higher wages because of the federal Employee Retention Credit, part of the Coronavirus Aid, Relief, and Economic Security Act, better known as the CARES Act. 

“It’s not like we had this money before and weren’t paying it,” she said. 

Watts, however, hopes these higher wages can become the norm in New Orleans, even once the federal assistance ends. She has seen life get harder for her employees, as rising housing prices have pushed them further from the city’s center, requiring people who once relied on bikes or buses to buy a car.  

Increasing wages long term would require restaurants to raise prices, which can only happen, Watts said, if the change occurs across the city. 

“This city is used to paying very low wages for kitchen staff,” she said. “Wages and the ability to pay them have a lot to do with what everybody else is paying.”

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