Encore Boston and the Tight Labor Market

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Retrieved From https://www.encorebostonharbor.com/

After many years of jockeying for a casino license and a legal fight stemming from sexual misconduct allegations against former CEO Steve Wynn, Wynn Resorts was granted a final approval for its Massachusetts casino on April 30th, setting the stage for Encore Boston Harbor to open this summer.

With the lawsuit putting Encore’s license in jeopardy for so long, the casino could not really begin hiring employees since people were not sure if the jobs would actually exist. With the settlement, which allowed them to retain their license, coming less that 2 months before the planned opening date, the operators now have the fun task of hiring 5,500 workers within that time frame.

Seeing how the metro Boston unemployment rate is 2.7%, well below the national 3.6% rate, this is not the easiest point in time to have to go about such a heavy hiring spree. The way they are going about it, though, is a prime example of how such a tight labor market can play right into workers’ hands.

A Win for Workers

As part of their licensing agreement, Encore is required to fill three-quarters of the jobs with workers from within 30 miles of Everett where they are located. This means that Encore cannot simply recruit from looser labor markets away from Boston, like Springfield, MA, where the unemployment rate is a full percentage point higher.

As a result, the casino’s operators are offering workers far better pay and benefits than they would receive at similar jobs elsewhere, tapping into the deep pockets of the multi-billion dollar casino company. For example, dishwashers and housekeepers will start around $20 per hour with a full benefits package (401K, parental leave, etc). Take that in for a moment. You could earn the same washing plates as you could working as a branch banker for most Massachusetts banks, jobs that usually require college degrees.

This is a huge boost for workers around Everett. The majority of the positions being filled are low or unskilled jobs. With housing prices around the Boston metro increasing faster than incomes, low-skilled jobs paying $20 per hour will go a long way in helping less educated individuals stay within their neighborhoods and the city.

The benefits do not stop there, too. Due to the high end nature of the hotel and restaurants at Encore, the workers being recruited are mostly more experienced individuals who are currently in supervisor or manager positions at other establishments. With these people leaving their current posts for Encore, their old jobs become open, giving a window of opportunity for less experienced workers to move up into better paying positions.

This sort of trickle down effect means that the 5,500 new Encore employees will not be the only ones to see higher pay and better jobs. With the added competition for labor, wages at other hotels and restaurants will likely rise as businesses fight for an even smaller pool of workers than there already is.

Encore is a big win for metro Boston labor. The casino is not a universal win for everyone, though. As workers reap the benefits of better wages, local businesses will start to feel an increased strain.

The Other Side

A fundamental part of the business cycle occurs when companies become too strained by a tight labor market. As job openings rise and companies increase wages to fight for workers, operating costs rise and productivity flat lines. As history shows, a tipping point occurs when inflation begins to rise too fast, interest rates are increased, and businesses have to cut costs somewhere, resulting in an economic downturn.

The U.S. is not at this point in the cycle, as companies are still adding new jobs and inflation is still muted. However, the strains of fewer potential workers and rising wages can still crimp business growth, especially for small companies.

These local small businesses are the exact ones being strained by the hiring spree of Encore and the already tight labor market. Most higher end restaurants where servers and cooks are being picked from are not national chains, but rather locally owned establishments. Without the corporate scale of a national billion dollar company, too many unfilled jobs coupled with wage increases will put a hefty strain on these businesses.

It is too soon to tell the full effect Encore is having on local businesses since they are still filling positions and are not even open yet. The positive impact on workers’ wages and the higher consumption that follows may very well offset the added costs on businesses. Many owners around the metro area indeed feel this way.

Regardless, Encore is a prime example of how such a tight labor market can be a huge win for laborers but a strain on business, especially at the local level. After all, a $20 per hour wage for washing dishes is a truly extraordinary feet at any point in time.

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Many of the details for this post were retrieved from a Boston Globe article titled “Workers hold the cards as casino fills thousands of jobs” from their May 15th print edition.

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