How will $15 federal minimum wage impact golf operations?

Are there troubles in store for U.S. golf operations?

Soaring green fees, snowballing dues, scores of lost jobs, deteriorating course conditions, possible course closings – are those the troubles in store for U.S. golf operations if Congress enacts a $15 federal minimum wage?

Our industry’s foremost advocacy groups have raised the possibility. The National Club Association has advised its 700 members to badger their elected representatives about the proposed Raise the Wage Act, contending that the legislation would have a “devastating impact” on club finances and “likely be unsustainable in many areas of the country.”

Similar warnings are being issued by the National Golf Course Owners Association, which fears that increased labor costs will lead to increased prices, thereby putting its members in a financial bind. The group thinks a $15 hourly wage would be especially consequential for course owners, who spend significantly more on labor than most of their counterparts in other industries. For a retailer or restaurateur, labor might represent 20 percent of expenses. For a course owner, it represents 50 to 60 percent.

“The NGCOA’s position is that the cost of labor should be market-driven,” said Ronnie Miles, the group’s senior director of advocacy. “Having wage and benefit packages set to a national standard is the wrong way to go, because the cost of living isn’t the same everywhere. We believe the minimum wage should be set by states.”

But here’s the rub: The NCA and the NGCOA are waging a battle that’s largely been decided. The Raise the Wage Act may be stymied at the federal level, but a $15 minimum wage is nonetheless clearly on the horizon. Several major cities – Denver, New York and Seattle among them – have already raised minimum wages to $15, and at least a half-dozen states expect to raise theirs to $15 before long. California’s is currently $14, and Washington’s is just 4 cents short of $14. All told, 20 states have minimum wages of $10 or more.

More importantly, very few employees at U.S. golf courses earn the $7.25 federal minimum. Evercore ISI, an international business consultant, has reportedly determined that the effective minimum hourly wage across all industries in America is closer to $13, a number that Mike Ryan, Troon’s chief operating officer, says “sounds about right.”

“I’m not in a panic mode by any means,” Ryan said. “We compete for workers not just against other golf properties but against the hospitality industry in general, so if we don’t have competitive hourly wages, we could lose quality people. In some parts of the country, we may need to go beyond $15.”

Troon, a third-party operator, works with owners to set hourly wages at more than 400 U.S. golf properties, a collection that includes municipal, daily-fee, resort and private tracks. Keeping a lid on labor costs is an important part of its job, but Ryan understands that golfers have expectations that can only be met with experienced, dedicated employees.

“We sell experiences,” he noted, “and we have to balance the costs involved against the expectations that our customers bring regarding course conditions and service levels.”

Photo by Andre on Unsplash

Ryan’s comment outlines the dilemma that course owners face. Labor is both their greatest expenditure and their most precious asset. People invariably change jobs for higher pay, and an alphabet of U.S. companies – the list begins with Amazon, Best Buy and Costco – currently offer $15 or more.

“Course owners can’t be in a position where they can’t find qualified labor,” said Larry Hirsh, president of Golf Property Analysts. “A $15 minimum wage would obviously have economic effects, but if you do the math, in most cases the impact would be manageable.”

Okay, let’s do the math.

We’re generalizing here, but owners of upscale daily-fee courses with $2 million in expenses – courses likely ringing up about 30,000 rounds annually, at $60 to $80 apiece – are spending about $1.2 million annually on labor. One-third to one-half of that money goes to salaried employees, and a lesser amount goes to hourly employees who already earn $15 or more.

To keep the math simple, let’s figure that all of the course’s hourly employees – a group that represents $600,000 in annual expenditures – get a 25 percent increase, from $12 an hour to $15 an hour. These raises would add $150,000 to expenses, which works out to $5 a round. On a $70 green fee, that hardly seems like a fatal blow.

Again, we’re generalizing, and we aren’t factoring in seasonality or part-time work, both of which would reduce the financial hit. Also, markets are different, so every owner’s mileage will vary. Courses with $1 million in expenses that generate 30,000 rounds might see a $2.50 increase, and courses in California might add maybe $1.50.

These modest price increases aren’t what concerns the NGCOA, however. The NGCOA worries about the ripple effects of a $15 minimum wage. If employees earning $12 an hour get $3 raises, should employees earning $15 also get $3 raises? And what about those currently earning $18 an hour?

“If we introduced a $15 minimum wage but froze all other wages, there would only be a minimal impact on labor costs,” Miles noted. “But I don’t believe the wage increases will be frozen. I think they’ll flow through the entire workforce, perhaps even to salaried employees, and that really could be damaging.”

Needless to say, the impact of such ripple effects is difficult to calculate, especially when one considers that a $15 minimum wage would arrive gradually and not take full effect until 2025. The increase might open a chamber of financial horrors, or it might be much ado about nothing.

“A $15 minimum wage would increase costs and maybe make golf less affordable, which is a potential problem,” Hirsh said. “But if owners don’t want to pay competitive wages, they risk losing quality labor, and that affects the product. It’s hard to say which would have the greater impact.”

Speaking for labor in general, Americans by and large believe the positives outweigh the negatives. According to the Pew Research Center, 62 percent of U.S. adults support a $15 minimum wage, and the vast majority of those opposed nevertheless support an increase of some kind.

The NGCOA is part of the latter group.

“The floor needs to be raised,” Miles said. “The issues are where the floor should be and how quickly it should be raised.”

Ironically, a $15 minimum wage could be a blessing in disguise. Course owners have been desperate to raise rates for years, and the federal government may give them an excuse to do it.

Robert J. Vasilak is one of Golf Inc.’s contributing editors. He blogs at @RJVasilakGolf.com.

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