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Cape businesses squeezed as wages increase

New wage laws mean higher pay for foreign workers at the Flying Bridge restaurant in Falmouth and elsewhere on the Cape and Islands.

Steve Haines For The Boston GlobE

New wage laws mean higher pay for foreign workers at the Flying Bridge restaurant in Falmouth and elsewhere on the Cape and Islands.

When tourist season hit, the Lighthouse Inn in West Dennis was ready to receive guests. The room rates were set, reservations had been made, and the housekeeping staff of temporary foreign workers was in place.

Then innkeeper Gregory Stone got a notice from the federal government. Because of a string of lawsuits and legal rulings, he suddenly had to pay his cleaners an additional $2 per hour, throwing off his payroll budget for the season and potentially cutting into the summer profits that he needs to carry him through the year

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“We’re just going to have to live with it,” Stone said.

For more than a decade, employers on Cape Cod and the Islands have depended on seasonal foreign workers to meet their summer staffing needs because they cannot find US citizens to fill the jobs. But new rules for the H-2B seasonal worker visa program have sparked unexpected increases in required wages – some in excess of 40 percent — after room rates, menus, and other prices have been set for the season.

Some Cape Cod resorts are now paying hourly wages that are $4 or more above expected rates, Cape tourism officials said. The minimum required wage for a house cleaner has jumped more than 30 percent to $13 per hour from $9.91, according to figures from the H-2B Workforce Coalition, an association of employers who use the program. Drivers must now be paid $18.02 per hour, up more than 40 percent from $12.76.

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“That’s really problematic for employers,” said Laurie Flanagan, the coalition’s cochair. “We’re seeing a lot of sticker shock over the new wage rates. It is just something that H-2B employers can’t absorb.”

The wage increases are just one of the issues employers who use the H-2B program are grappling with this summer. While the Department of Labor developed new pay rules, it stopped processing H-2B applications, delaying the arrival of many workers and leaving employers scrambling to get dishes washed and rooms cleaned in the early part of the season.

Steve Haines For The Boston GlobE

The new regulations on foreign workers will mean pay raises for many at the Flying Bridge restaurant in Falmouth.

Many business owners are also keeping a close eye on the debate over the immigration bill, which passed the Senate Thursday but faces opposition in the Republican-controlled House. They are worried that lawmakers, concerned about jobs for American workers, might not appreciate the importance of seasonal foreign help to tourism industries and make the program more restrictive and costly.

“My fear is that going forward that people don’t understand the program,” said William Zammer, who owns four restaurants on Cape Cod. “I have tried in numerous ways and have not been able to fill those positions. If I could find American workers, I would do it.”

For many Cape and Islands businesses, the H-2B visa is at the heart of summer hiring. The program allows businesses to bring in workers from abroad to fill low-skill positions for which they cannot find qualified domestic applicants. Employers must pay the local prevailing wage for the position, as determined by the US Department of Labor.

Before the last recession, which began in late 2007, as many as 5,000 workers came to Cape Cod on these visas each year, generally starting in early spring. The economic crisis lowered that number as businesses did less hiring and high unemployment created more willing, eligible local workers.

Today, the number of H-2b workers on the Cape is about half the prerecession peak, but the program remains an essential part of many employers’ staffing strategies.

Steve Haines For The Boston GlobE

Drew Kutcher (left) and Lloyd Currie went over the lunch specials at the Flying Bridge in Falmouth. Owner Bill Zammer hires dozens of people through the H-2B program.

Employers who use H-2B are required to pay the foreign workers the prevailing wage as a way to prevent exploitation of foreign workers and depressing wages for American workers.

The developments that led to this year’s wage increases began in 2008, when the Department of Labor issued new rules for determining prevailing wages.

That system divided each job into four categories, each with its own wage rate, depending on the level of experience. Employers using the H-2B program, however, overwhelmingly hired entry-level workers, who were paid the lowest rates.

Labor groups challenged the rule. Earlier this year, a federal judge decided that the rule ultimately lowered wages for American workers in similar positions and ordered the Labor Department to adopt the new regulations. The higher wages, which went into effect in April, apply to foreign workers already in the country and pending visa applications.

Labor groups hailed the decision as an important step toward improving working conditions and pay for domestic and foreign workers alike.

The old system kept wages low, making it less likely that employers would find Americans willing to take the jobs, said Ana Avendaño, director of immigration and community action at the AFL-CIO.

A higher required wage is a move toward leveling the playing field between foreign and local workers, she said.

But business officials worry that the higher mandated wages are a burden on small establishments already working with tight margins.

“Businesses cannot survive with this type of sudden labor cost increase,” Jane Nichols Bishop, whose Mashpee company Peak Season Workforce recruits H-2B workers for local businesses, testified earlier this month at a hearing held by the House Small Business Committee.

Sarah Shemkus can be reached at seshemkus@gmail.com.
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