Restructuring and low-wage workers in a high-wage economy: the case of Danish hotel room attendants Tor Eriksson and Jingkun Li Aarhus School of Business April 2006

Introduction The hotel industry: classic low wage, labour intensive service industry Restructuring process: subcontracting of services; attempts at more flexible staffing This paper: How are workers in low-end jobs affected? International project (RSF); results from in-depth case studies from Denmark Denmark: high wages, the most compressed wage structure among industrialized countries; comparison to U.S.

Competitive conditions Large hotels, part of international chains in the bigger cities; small personally owned hotels in the ”province” Copenhagen area more sensitive to variations in international demand (international business travelers and tourists) Number of hotels decrease, but capacity increases due to new larger hotels especially in Copenhagen area Drop in profitability in (econ. downturn, SARS, terrorism); continued increased competition pressure thereafter Increasing problems recruiting employees. Reflects general shortage of labour. Hotels compete for labour with the retail industry

Workforce Students make up about over 30% of employees in hotel industry. Many room attendants (50-60%) are immigrants. Trend increase in employment, largely due to increasing number of students and other casual workers Young (50-60% below 30), females (70 %), unskilled (45 % primary school only) Unemployment higher than average: 14-22% in recent years Trendwise increase in wages; parallel for student and non- student employees

Compensation: wages Source: IDA/CCP data 1 Euro = 7.5 DKK

Employment relationships Regulated chiefly by agreements between unions and employers organisations (less by law) Flexibility, but guaranteed number of weekly working hours Within- but not between-job flexibility Two groups of employees: those who want a more permanent employment relation and those who appreciate flexible hours and conditions Trade-off: flexibility vs. quality of employees

Hiring, opportunities for training Some years ago, outsourcing of cleaning popular Less more recently and signs of return to in-house due to inflexibility and quality concerns. Hiring from job centers and pool of ”pop in” applicants Increasing considerations of provision of more training and career opportunities to compete in recruitment with the retail sector

Case study design Capital cityProvincial cities Luxury hotel (4-5 stars hotel) 22 Budget hotel (2-3 stars hotel) 22 - Hotels with outsourced housekeeping are included - Personnel from external cleaning companies interviewed - Hotels with more than 10 full-time employees are selected (hotels with more than 100 beds)

Job quality Job contents Employment and recruitment Compensation (wages and benefits) Work schedules/hours Opportunities for advancement/job ladders Collective agreements

Employment and recruitment Many part-time jobs Turnover is low Full time and fixed contract (a few months up to 5/10 years, some even 30 years) Casual (a few months up to ½ years) Recruitment (announce, word of mouth and job centers) Some hotels experience difficulties in recruiting, whereas others do not Some hotels require to speak Danish, whereas others do not. Head housekeeper usually speak Danish as a requirement Maintenance Flexibility Social activities No pay incentives Job qualification Good health (no back problems) Stability

Compensation: 1) wages No differences between luxury hotels and budge hotels Room attendants (RAs): € per hour (excl. 12.5% holiday benefits) Assistant head housekeepers: € per hour (excl. 12.5% holiday benefits) Head housekeeper: € per hour (27,000 € per year, excl. 12.5% holiday benefits) Outsourcing Hourly pay is 1-2 € higher than in-house housekeeping

Compensation: 2) benefits Additional payments for overtime work typically 1-3 € higher than normal hourly pay However, external cleaning companies are more strict on overtime pay. Some hotels provide RAs breakfast with very little charge as other employees. Some hotels provide discount of their hotel/chain hotel rooms for RAs

Work schedules/hours Many part-time staff (20-30/32 hours per week and fixed contracts ). Most of workers are guaranteed the fixed hours with fixed schedules and specific days off Some casual contract workers, typical students, weekend shifts and “on call” during weekdays Head housekeeper is usually full-time employed Working hour is typical kl. 7/8 -13/14 Flexibility of switching shifts Over-time pressure exists but in a acceptable level

Job satisfaction and opportunities for advancement/job ladders Most of RAs are very satisfied with their jobs RA→ assistant head housekeeper → head housekeeper A few have ambitions to seek for promotion Most of them do not want to change hotels for opportunities for further job ladder’ Students do not tend to seek their career in the housekeeping area.

Collective agreements Few (20-30%) are member of trade union Most of casual workers are not member of trade union Expensive to be member of trade union (about 400 € per year) Hotels recommend RAs to join the trade union for extra security

US – DK comparison Compressed Danish wage structure but not necessarily higher total costs. Other employees relatively cheap. Less staffing and higher within-job flexibility in DK. Higher job satisfaction levels and lower turnover rates in DK Danish firms react to increased competition by making jobs more attractive (training, careers). Less outsourcing, return to in-house. Outsourced employees slightly higher paid, but less satisfied. Employers less satisfied with quality of outsourced work