Score One for the Little Guys as W Hotel Drops Its Minimum Wage Surcharge in Seattle
The chain escapes a potential PR nightmare after getting called out for listing a surcharge to cover the cost of a higher minimum wage, but not one for its $4.1 million CEO.
Attorney General Sessions, North Korea, Sean Spicer, the war on Nordstrom; and underlying it all, the idea that that man is the president. Bleak times. So maybe you need a little shot in the arm? A story with a happy ending to let you know that the forces of good can still win one for a change? Well, you came to the right place. Read on for the hilarious, telling, and ultimately happy tale.
Sometime at the end of January, a man checked into the W Hotel in Seattle. I’m pretty sure I stayed there myself once. My tastes run to the older places, like the splendid 1920s Fairmont Olympic one block up, but like all W’s it’s nice, a little too full of beautiful people maybe, a block from the famous Rem Koolhaas library, and not too far in the other direction from the venerated Pike Place Fish Market.
On the morning of Jan. 31, the man ordered room service. Yogurt and granola, bread, juice, and coffee. The staff person brought the food and the bill, which came to $23 even. The man looked down at the bill and noticed that there was a $2.21 food tax charge; nothing unusual there. But then there was also something called the “MW Surcharge,” totaling $1.50. MW Surcharge, the man thought; what the heck is that?
His question was answered immediately as he looked at the bottom of the bill, where he saw the words: “A 6.5 percent surcharge has been added to help offset the cost of the Seattle Minimum Wage. This is not for services provided and is not paid directly to service staff.”
In April 2015, the Seattle City Council passed legislation raising the minimum wage from $9.50 (then the local minimum wage; the federal minimum wage, as you probably know, is $7.25) to $11 immediately and then in stages to $15. The whole schedule is explained here, if you’re interested. Beginning on Jan. 1, employers with more than 500 workers in the United States, of which the W Hotel chain (part of Starwood, itself now part of Marriott) is assuredly one, were required to pay their workers $15 an hour. (Smaller employers won’t hit the $15 mark until 2021.)
The W Hotel chain isn’t the first corporation to decide that it was somehow fair to stick it to customers now that they were required to pay a decent wage to their workers. The biggest hubbub seems to be happening in San Diego, where the minimum wage went up to $11.50 on New Year’s Day. Some restaurants added surcharges. It’s not illegal per se, but some establishments were either not telling their diners about the extra tariff they’d imposed on them or telling them it was government-mandated, and the city attorney there commenced a crackdown.
So back to our narrative. Who was this mystery guest? If it had been a businessman, he wouldn’t have blinked an eye, probably; or someone in the hospitality industry. But unfortunately for the W Hotel, the guest was the economist Eric Beinhocker, author of the important book The Origin of Wealth and a man who spends every day of his life thinking about the various aspects of economic inequality and what to do about them.
And even more unfortunately for the W Hotel, he was in town to see Nick Hanauer.
You may have heard of Hanauer (who is, I should note, a friend of mine and a donor to the journal I edit). He’s the Seattle venture capitalist who is an admirable traitor to his class and has spearheaded campaigns like the one to raise taxes in Washington state on people like himself. That one didn’t pass, but the minimum wage one did, and Nick’s relentless work on its behalf was one of the big reasons. He employs a lot of people and he believes that the actual key to economic success is not to give tax cuts to people like him but to give workers more money so that they have more to spend as consumers. He says the “if I raise your wages, I might have to fire you” line is pure propaganda—it’s “a threat, not a theory,” as he put it in a great piece he wrote for me at Democracy journal.
So the W Hotel walked into it. At 11:32 a.m. Beinhocker tweeted a photo of his room-service bill, writing: “Shameful—@WHotels ‘surcharge’ for paying its workers a living wage. Where’s surcharge for CEO’s pay? #fightfor15.”
Beinhocker told Hanauer of the situation, and at 1:11 p.m., Hanauer tweeted: “Hey @WHotels you charge a 6.5 percent surcharge for paying workers fairly, but no surcharge for the $4 million you pay your CEO. Why???”
Starwood CEO Thomas B. Mangas did indeed pull down $4.1 million in total compensation in 2015. Now a conservative might argue: But Mangas’s compensation is a voluntary cost the corporation imposes upon itself, whereas the minimum wage is a government-imposed cost. Fair enough. So here’s another comparison.
Last year, Starwood was acquired by Marriott. As part of that process, Marriott spent a lot of money getting the required antitrust authorizations from governments all over the globe: United States, China, Mexico, Saudi Arabia, wherever. I don’t know how much it spent doing all that, but it couldn’t have been cheap. These too were government-imposed costs. But no Marriott or Starwood customer has ever seen an Antitrust Authorization Surcharge on their bill.
Paying their lawyers whatever it is they pay them—many, many times $15 an hour, we can be sure—is a normal part of doing business. But paying low-end workers a good wage somehow isn’t normal.
It’s awfully telling. It wouldn’t surprise me if the hotel people who made this decision to slap on this surcharge didn’t even realize how aggressively ideological a move it was, how rooted in supply-side assumptions is the idea that paying their lowest-paid workers a little more is so unique a burden that they have to whine to their customers about it. And then tell them that the money from the surcharge doesn’t even go to staff! I tried to ask them, leaving a detailed phone message with the hotel’s general manager and sending a detailed email to Marriott corporate comms last week, but neither responded to me.
In any case, as I noted up top, it ended well. Someone at the hotel obviously Googled Hanauer, or knew who he was, and saw what the hotel was getting itself into.
And so, at 6:28 p.m. the same day that Beinhocker and Hanauer tweeted about this, a Twitter account called @SPGAssist (for Starwood Preferred Guest) tweeted back to Beinhocker: “We had a surcharge due to minimum wage increase. After review, we decided to end the policy.”
Beinhocker is inclined to cut the hotel a break. “They did the right thing, and they did it quickly,” he told me. “So good for them for fixing it.”
Hanauer takes a less charitable view. “Itemizing the costs of paying workers decently is a perfect example of trickle-down economics thinking in the Starwood corporate culture,” he emailed me. “The obscene salaries and bonuses we pay ourselves are ‘good for the economy’ and much deserved. Paying our workers a little bit more is bad for the economy and consumers. Wow. What sociopaths.”
Whether you share Beinhocker’s interpretation or Hanauer’s, the bottom-line fact here is that these surcharges are highly ideological, designed only to make the hotel guest or diner or whatever get mad at people who clean toilets and wash dishes for adding $1 to the cost of their $30 steak. It’s a stark of example of the kind of class warfare that’s really practiced in this country.