Even before his inauguration, President-Elect Joe Biden revealed his plan to raise the minimum wage. As outlined in the $1.9 Trillion COVID relief bill, Biden sticks with his promise to blanket a one-size-fits-all $15 minimum wage policy over the country.
Biden’s purpose for including a minimum wage increase in his relief bill is that the policy will “stimulate economic growth and support low-wage workers.” However, his minimum wage hike also contains a problematic suggestion that can decrease the incomes of the very workers he claims he supports. Tucked quietly in the minimum wage plan is the provision to eliminate the “tipped wage.”
This comes as no surprise considering Mr. Biden’s platform is a regurgitation of Big Labor agendas that have, for decades, declared war on what is commonly referred to in the restaurant industry as the “tip credit.” The tipped wage, or tip credit, is an economic tool used by full-service restaurants. It allows the employer to pay tipped workers a wage below the federal minimum wage as long as their tips make up the difference. If their tips do not make up the gap and bring the employee to the federal minimum wage, then the employer, by law, must make up that difference. As Biden and labor activists do, dispelling the tip credit by calling it a “sub-minimum” wage is disingenuous. Under a tip credit, workers will always make at least the federal minimum wage, but the majority make much more because of tips.
Most full-service restaurant workers make far more than minimum wage with their tips. On average, working short 4- to 6-hour shifts, a server likely makes $25 to $50 an hour. A tip credit also has a positive impact on non tipped restaurant workers like cooks and dishwashers. It allows restaurant industry employers, who traditionally work within razor-thin profit margins, to distribute wages more fairly. It allows money to go to those “back of house” employees instead of tip earners, keeping their wages from stagnating. Eliminating the tip credit and raising wages for tipped workers freezes the employer’s ability to keep those back of house wages fluid and competitive.
Tipped workers face even more significant negative impacts with a wage raise and no tip credit. Look no further than to the city of Seattle. Washington is one of only seven “high wage, no tip credit” states and the birthplace of the $15Now movement that Biden has recruited for his platform. In 2014, the $15Now minimum wage bill was passed in Seattle. It was proposed by Socialist Alternative activist Calvin Priest, now husband of famed socialist Seattle City Council Member Kshama Sawant. Both Priest and Sawant managed to get the minimum wage hike pushed through the SEIU backed Seattle City Council despite massive rejection from business owners and private-sector workers.*
It wasn’t long after Seattle’s passing of $15Now without a tip credit that tipped workers like myself started feeling the wage hike’s harmful effects. Not only were customers tipping less because they thought workers were making more money, but employers feeling the pinch began to change their pay models to navigate the rising labor costs. Service charges were born, tip lines were removed, and menu prices were raised. As employers made major shifts regarding how workers were paid, incomes declined or stagnated and left tipped workers with dents in their pocketbooks. Some of us even lost jobs as restaurants began to eliminate support staff positions or permanently close. A study, commissioned by Sawant and Seattle Mayor Ed Murray, supported the anecdotal job loss claims and continued to state that workers were, in fact, losing income. By the end of 2019, until the coronavirus came roaring in, workers watched Seattle lose restaurant jobs to the wage increase. As the hike approached $16.39 on January 1, 2020, more and more employers decided to fold their hands. The wage hike, paired with high rents, became the one-two punch that KO’d many employers just before the pandemic hit.
It is reasonable to believe that, under Biden’s proposal, the nation’s full-service restaurant industry will face the same negative consequences that we have seen in Seattle and other cities where the wage hike was adopted and the tip credit eliminated. Tipped workers will be subject to the same pay model modifications, as a nation of restaurant owners figure out how to pay an artificially-inflated wage to tipped workers, who already make the restaurant’s highest wages. Pair that with an industry already devastated through mandated COVID lockdowns, and it isn’t hard to imagine that our full-service restaurants may never make it back up on their feet. This means that our country’s second-largest employer, which employs many women and minorities, will be negatively impacted under a minimum wage law without a tip credit. If Joe Biden wants to “Bring Back Better” as we reopen the full-service restaurant industry and he raises wages, supporting the tipping culture, including tip credits, will be imperative to supporting workers and the industry that supports them.
*Additional links on Seattle restaurants’ closure:
1. Seattle Restaurant and Bar Closures
2. The Saddest and Most Sudden Seattle Restaurant Closures of 2019
3. These Popular Seattle Restaurants Closed in 2019