Tourism for taxes or good jobs?

Tourism is widely valued by cities across the United States. Public officials and their economic advisers champion the cause of tourism by using a variety of economic models to show how tourist spending gets converted to restaurant tabs and then to employee wages. In turn, these wages are used to buy groceries and consumables that bolster the economy. Driven by this logic, the multiplying tourist dollar has inspired public-private partnerships to develop hotels, attract visitors and build comfortable meeting spaces and entertainment venues for their enjoyment. A significant body of literature, primarily from neo-liberal economists, supports public investment in all aspects of tourism.

The enthusiasm for the tourist dollar within city halls and chambers of commerce is not without detractors. Such important urban theorists, as Susan Fainstein and David Harvey have raised concerns about the distribution of benefits within the tourism industry (subsectors that comprise the tourism industry are generally the lowest paid segment of any local economy). In The Just City (2010), Fainstein reflects on two decades of research on urban tourism and, given little movement toward a just end, suggests – somewhat in passing — that significant public subsidies given to private businesses within the tourism sector should empower residents and city planners to pursue policy options which achieve a fair distribution of economic benefits (Fainstein, 2010, p. 183). In the Rebel Cities (2012), Harvey observes the array of private rent-seekers trading on tourist attractions built and maintained with public investment. He considers this an appropriation of capital which belongs to the community (Harvey, 2012, pp. 105–106).

Urban interest in tourism, from a local economic development perspective, gained traction in the early 1990’s as cities struggled to retain traditional employers in central business districts. Fainstein joined with Dennis Judd and Lily Hoffman to compile two edited volumes on the topic; The Tourist City (1990) and Cities and Visitors (2003). The editors included low wages among a number of issues that planners should consider when developing a regulatory framework to guide the sector (Hoffman, Fainstein, & Judd, 2003, p. 9), although much of the burden for increasing wages was left to labor organizations and community organizers (Judd & Fainstein, 1999, p. 24). Twenty years removed from this spike in interest, Fainstein touched on tourism in The Just City (2010), again placing the burden of equitable wages on community organizers, while offering a new justification for action based on two decades of pubic investment in the sector, suggesting, “With the involvement of the state …comes the interests of nonowners of capital in limiting the discretion of investors and injecting concerns of justice into policy making (Fainstein, 2010, p. 183).”

Fainstein’s perspective is shared by heterodox economists, sociologists and urban theorists, but it remains a minority viewpoint across the full spectrum of academicians and practitioners (Ren, Pritchard, & Morgan, 2010, p. 887). The perspectives of neo-liberal economists dominate the field. Economists. like Larry Dwyer, focus on business profits with little or no priority given to the externalities associated with low wages within the industry. Dwyer et al’s voluminous text, Tourism Economics and Policy illustrates this point. With twenty-one chapters encompassing 855 pages, the authors declare there was not enough room to treat labor economics, or synthesize the fragments within the book that touched on economic sustainability (Dwyer, Forsyth, & Dwyer, 2010, p. 5,33). Others bypass labor to promote economic benefits to the community at large. Boley et al focus on promoting this point, suggesting governments consider “strategies to increase their residents’ attitudes toward tourism development,” and, “promote the indirect personal economic benefits of tourism, including tax burden relief and the services subsidized by tourism dollars” (Boley, McGehee, Perdue, & Long, 2014, pp. 46–47).

Most public officials have joined with neo-liberal economists in sidelining any policy discussions regarding the wage structure in the tourism industry. As an example, three of the largest states for tourism, California, Florida and Virginia, while actively promoting business interests within the industry, are silent on the wage structure of those working in the industry.

 

In Florida’s strategic plan for tourism, the stated goal is to maximize the economic impact of travel and tourism, with an objective to achieve $100 billion in tourism related spend by 2020 (Visit Florida, n.d.).

 

In the Commonwealth of Virginia, the responsibility for promoting tourism falls to the Virginia Tourism Corporation (VTC), a department under direction of the Governor. The corporation still operates under a vision plan adopted in 2002. The goal of the plan is to increase tourism market-share and annual visitor spending in Virginia, and the objectives are to 1) increase visitor volume, length-of-stay and spending in Virginia, and 2) increase tourism funding annually, including identification of new sources, to advance tourism marketing and development (Virginia Tourism Corporation, Commonwealth of Virginia, 2002).

 

In California, tourism officials set three goals in their 2012 strategic plan: 1) Garner 91% or better approval of a 2013 state-wide referendum on rental car assessments (they achieved 93%), 2) elevate legislators’ perceptions of the importance of the industry, and 3) raise consumer perceptions of California and increase media chatter with positive press articles that mention California and the economic benefits travel (Visit California, n.d.).

 

Strikingly, the missions, goals and objectives of all three states mention nothing of community benefits or employee wages, even though the accommodation sector is nested within the lowest paying industry sector in all three states (Table 1).
Table 1 Median wages by NAICS Sector in 2014 by Sector for Key States

Table 1

 

At the local level, the exclusion of wages from tourism development and promotion policies is also prevalent. A 2014 survey on local economic development conducted by the International City Managers Association (ICMA) found that among five potential priorities (tax base, jobs, quality of life, environmental sustainability and social equity) city officials placed increasing the local tax base first and addressing social equity (i.e., distribution of economic benefits) last. Of the 32 activities identified to address these economic development priorities, tourism promotion was ranked second, only behind quality of life investments (arts, culture, education and recreation) (International City Managers Association, 2014). The proximity of increasing revenues (tax base) as a priority, and tourism promotion as the means to this end is no coincidence.

 


About the author: Bill Farley has 30 years of experience in local economic and community development as a public official, entrepreneur and corporate executive. He is a former instructor of public policy and public finance at the University of Southern California Price School of Public Policy. He is currently advising organizations on local economic policy while completing a PhD in Public Policy and Administration at Virginia Commonwealth University. 

 

Citations:

Boley, B. B., McGehee, N. G., Perdue, R. R., & Long, P. (2014). Empowerment and resident attitudes toward tourism: Strengthening the theoretical foundation through a Weberian lens. Annals of Tourism Research, 49, 33–50. https://doi.org/10.1016/j.annals.2014.08.005

Dwyer, L., Forsyth, P., & Dwyer, W. (2010). Tourism Economics and Policy. Channel View Publications.

Fainstein, S. S. (2010). The Just City. Ithaca, New York: Cornell University Press.

Harvey, D. (2012). Rebel cities: From the right to the city to the urban revolution. Verso.

Hoffman, L. M., Fainstein, S. S., & Judd, D. R. (Eds.). (2003). CIties and Visitors; Regulating People, Markets and City Space. Maiden, MA: Blackwell.
International City Managers Association. (2014). Economic Development 2014 Survey Results.

Judd, D. R., & Fainstein, S. S. (Eds.). (1999). The Tourist City. Yale University Press.

Ren, C., Pritchard, A., & Morgan, N. (2010). Constructing tourism research; A critical inquiry. Annals of Tourism Research, 37(4), 885–904.

Virginia Tourism Corporation, Commonwealth of Virginia. (2002). Vision Plan for Virginia’s Tourism Industry. Retrieved from https://www.vatc.org/uploadedFiles/Administration/About/Administration_and_Finance/documents/VisionPlan.pdf

Visit California. (n.d.). Visit California’s Strategic Business Plan; 2001-2016.

Visit Florida. (n.d.). 2020 Strategic Plan. Retrieved from http://www.visitflorida.org/media/24818/2020-strategic-plan.pdf

Advertisements

Making a case for the Just Host

Blog ArticleMy current research looks at high tax, low-wage sectors from a local economic development perspective. First up is the hospitality sub-sector. I’ve presented some of this research at an academic conference and to fellow researchers during my PhD studies. In the months ahead, I will write about this ongoing research project, introducing elements that will eventually find their way into future conference presentations, journal articles, and eventually, my second book. I will also present data from some detours along the way.
I will be presenting an eclectic group of topics relating to tourism and wages. My research synthesizes literature from six distinct disciplines; urban studies, tourism studies, public administration, public choice theory, real estate economics, and wage theory. With my unique set of experiences and biases (see below) I will be building on the work of Susan Fainstein (The Just City) and David Harvey (Rebel Cities), and testing the theories of public choice economists.
As for my data, I have the benefit of a national survey of economic development professionals, living wage data from MIT, hotel performance data from HVS, and wage and local government revenue data from the U.S. Census Bureau. Initially, I will start with simple cross tabulations of this data to reveal intriguing patterns and relationships. Some of the comparisons will include living wages, hotel revenues, and local government taxes. Others will look at the accuracy of performance claims made by local economic development officials. Some comparisons will focus on Virginia, others the nation, and some on large tourism market. The data will define the scope.

 

I approach this research informed by experiences from my career as a practitioner, my recent stint writing about U.S. history, and my age, gender, class and ethnicity.  As a practitioner, I served as a local economic development professional and corporate real estate executive,  and ran my own real estate advisory company. In this last role I helped develop several business–class hotels.  My research project in American history introduced me to labor relations in the industrial age, policies and tactics of FDR, and the battle for full employment legislation between 1945 and 1946.  Finally, I’m a white male, raised in an upper-income family during the 60’s and 70’s. I faced no economic hardships in my youth.  I remember when community colleges were free and catalogs for four-year colleges had one or two paragraphs devoted to college financing. Later,  as I raised a family in mixed-income areas, I observed the dramatic increases in college tuition combined with a deterioration of wages for entry-level employment. I developed an appreciation, albeit second hand, for economic challenges I never faced. Given my personal experiences, my research focuses on the power structures where I was employed for many years. I will leverage my understanding of hotel economics, real estate, local government administration, and public finance to provide a unique perspective on how the economic benefits derived from tourism can be can be distributed in a manner that contributes to a sustainable local economy.

 

I look forward to any constructive criticisms that you may offer. I consider any critique a gift.


About the author: Bill Farley has 30 years of experience in local economic and community development as a public official, entrepreneur and corporate executive. He is a former instructor of public policy and public finance at the University of Southern California Price School of Public Policy. He is currently advising organizations on local economic policy while completing a PhD in Public Policy and Administration at Virginia Commonwealth University. 

Rocky Mountain Radicals: Labor’s Rich & Powerful Allies

MHS ArticleNew in the Spring edition of Montana: The Magazine of Western History

The labor movement in the Gilded Age and New Deal era found an unlikely pair of allies in a wealthy miner and his nephew.

James A. Murray started his business empire with a few dollars in his pocket in 1863 prospecting in Rocky Mountain mining camps along Mullan Road. Over the next fifty-eight years he built a fortune that today would exceed $2.0 billion and stretched from Seattle to San Diego, and from San Francisco to Wyoming. Murray was a staunch advocate for labor and never stopped supporting their cause as anti-union corporations enveloped the American West. He funded a radical pro-labor newspaper affiliated with the Wobblies during the height of labor strife in World War I, and extended his radical legacy with a significant bequest to his equally radical nephew, future U.S. Senator James E. Murray.  The younger Murray rose to the top of Eamon de Valera’s support group in the U.S. and became the Senate’s strongest proponent of labor and progressive politics from  the New Deal Era until the dawn of the Civil Rights movement.

The story of the radical Murray family is told in depth for the first time in a beautifully illustrated twenty-page article in the Spring 2016 Edition of Montana: The Magazine of Western History. Copies of the Spring edition can be purchased individually from the Montana Historical Society.  The publication is also available in over 700 libraries across the globe. Find a copy near you on the World Catalog.

Coming next year: The biography of radical Copper King James A. Murray will be published by Montana Press Publishing Company in the Fall of 2017.

Book Review: When Mandates Work: Raising Labor Standards at the Local Level

when_mandates_workWhen Mandates Work [1] is a good resource guide for use in cities and airports located in primary urban markets. Most of the research centers on San Francisco, which likely applies to cities like Seattle, Portland and San Diego and their airports. The content of the book is drawn from individual journal articles written by several different authors, so the content varies dramatically from chapter to chapter.

Part one of the book looks at living wage ordinances in cities and airports. Significant benefits are found in terms of reduced turnover rates and improved employee morale. For restaurants in one study, price increases  of 2.8 percent occurred, which is remarkably similar to estimates on anticipated cost increases derived using MIT’s living wage models.[2] As an aside, I am confounded that there is not bi-partisan support for living wages at fast food restaurants across the country. Why any fiscal conservative would not want the fast food industry to stand on its own, and stop using federal subsidies to bolster worker’s living standards, is incomprehensible.[3] Every fiscal hawk should be wagging their finger at Ronald McDonald to get off the public dole!

Part 2 covers health care benefits and Part 3 provides execution strategies – including the use of Community Benefit Agreements (CBAs).

Anyone looking at CBA’s for their city should take a close look at the CBA negotiated with Twitter in San Francisco. The hearings on this document are readily available on-line in City archives. Twitter clobbered the City in negotiations. Adding insult to injury, the primary beneficiary of Twitter’s move to the City’s central business district (building owners) did not participate at all in the CBA.

If you are on a budget, review the table of contents and search for the individual journal articles that comprise this book which are relevant to your situation, and download those individually (most libraries provide patrons with access to JSTOR – the primary database for academic journal articles).


[1] Michael Reich, Ken Jacobs, and Miranda Dietz, eds., When Mandates Work: Raising Labor Standards at the Local Level (University of California Press, 2014).

[2] http://livingwage.mit.edu/

[3] McDonald’s has in the past directed employees to federal assistance programs through their employee hotline.

Historical Amnesia: The Humphrey-Hawkins Act, Full Employment and Employment as a Right (Ginsburg, 2011)

President Jimmy Carter signs Humphrey-Hawkins.

From the article abstract:

Economist William A. Darity has proposed a federal job guarantee with decent wages for all job seekers, an idea with deep, but largely forgotten, roots in US history. The article briefly explores some New Deal job-creation efforts and President Franklin Roosevelt’s proposal for an Economic Bill of Rights. It then focuses on two major attempts to secure full employment through legislation. The Full Employment Bill of 1945 was defeated; the compromise, the Employment Act of 1946 did not have full employment as its goal. After years of struggle, a much-weakened Humphrey-Hawkins Full Employment and Balanced Growth Act of 1978 passed, but then was violated and virtually ignored. Full employment shifts power from capital to labor, so major opposition can be expected from efforts to obtain it. Proponents need more power and a strong movement, including at the grassroots level, pushing for jobs for all–not just jobs for me or my group. Publicizing the benefits of past job programs and reintroducing the idea of a decent-paying job as a right are suggested, as well as making decent jobs for all the center of economic policy. This requires a fundamental break with neoliberalism and reallocating political power away from big business and Wall Street toward middle and working-class people and the working- and non-working poor.

Link to full article: http://www.njfac.org/bpe-ginsburg.pdf

The Missed Opportunity for an Economic Budget

JamesEMurrayFullEmployment“There is something wrong with the distribution of income in our economy. Not enough of the income created by production gets into the hands of those that will spend it back into production.

Senator James E. Murray, 1945 [1]

The end of World War II placed employment at the top of the national agenda. Seasoned lawmakers and experienced public officials had lived through the burst of an employment bubble after WWI, twenty-five years early, and the Great Depression that followed.

President Roosevelt, during his annual message to Congress, proposed a “Second Bill of Rights” to guide Congress in establishing “a standard of living, higher than ever know before.”

The rights included:

  • The right to a useful and remunerative job in the industries or shops or farms or mines of the nation;
  • The right to earn enough to provide adequate food and clothing and recreation;
  • The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;
  • The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;
  • The right of every family to a decent home;
  • The right to adequate medical care and the opportunity to achieve and enjoy good health;
  • The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;
  • The right to a good education.[2]

Senators Harry Truman (D-MO) and Senator James E. Murray (D-MT) presided over a Senate subcommittee focused on the first point, to provide employment opportunities for all Americans. When Truman left the Senate for the Vice Presidency, the responsibility for shaping legislation fell to Murray. In 1945, Murray, Chairman of the Senate Committee on Education and Labor, drafted Senate Bill 380, the “Full Employment Act of 1945” and found bi-partisan co-sponsors in Senators Wagner (D-NY), Thomas (D-UT), O’Mahoney (D-WY), Morse (R-OR), Tobey (R-NH), Aiken (R-VT), and Langer (R-ND).

S. 380 sought to go beyond the reactionary work-relief measures crafted after the Great Depression, by taking advance measures to avoid depression and unemployment altogether. A critical element of this proactive approach was for the President to prepare a separate “National Production and Employment Budget” (Economic Budget), apart from the regular budget, that prescribes a “complete and well-rounded program for maintaining full production.” Murray believed that the Economic Budget would focus lawmakers on substantive employment policy matters every year, as opposed to merely limiting the discussion to meaningless campaign rhetoric every presidential election. [3]

During the subsequent debates of S. 380, the bill was watered-down, the Economic Budget was dropped, as was “Full” from the title. The Employment Act of 1946, adopted and signed into law, created policy objectives similar to those outlined in F.D.R.’s Second Bill of Rights, but it fell short in focusing Congressional attention on the economy and unemployment.

An annual Economic Budget is a concept worth revisiting. It could pull the nation’s most important issue off the campaign trail and put it back into halls of Congress where it belongs. It would serve as a central point to discuss living wages, work-visas, public service employment and corporate out-sourcing.

[1] James E. Murray, “A Practical Approach,” The American Political Science Review 39, no. 6 (December 1945): 1119–26.

[2] http://www.ushistory.org/documents/economic_bill_of_rights.htm

[3] Murray, “A Practical Approach.”