The panic from tipped workers over the minimum wage hike is starting to come to a boil. The Biden administration has progressed the national $15 minimum wage bill to include eliminating tip credits. A tip credit is an economic tool used by the restaurant industry. It allows employers to pay a wage to workers who receive tips, that is lower than the minimum wage as long as the worker’s tips make up the difference between that wage and the minimum wage. If a worker’s tips, which usually exceed even minimum wages like $15, do not make up the difference, the employer must make up the difference. This means that all tipped workers can never make less than minimum wage.
Tipped workers are beginning to worry that this means tipping will become obsolete as the minimum wage is incrementally raised. They have seen the changes that restaurant owners in high wage states have made that ends with tipped workers losing their tipping culture to non traditional and non transparent pay models. Service industry workers who have depended on the tipping culture have been holding on for dear life as the industry reels from mandated dining room closures. They are impatiently waiting to jump back in, welcome their guests, and earn their tips. But the excitement of getting back to work is dampened by Biden’s push to pass a wage bill that has the capacity to change how they earn from their work.
The wage hike would leave tip credits on the side of the road and threaten tipping culture as restaurant employers change their pay models to survive. Service industry boards on Facebook and other social media communities are lighting up with comments from tipped workers posting their concerns. Unlike President Biden or any of the labor academics in his administration, these workers deeply understand their industry. Representative Pramilla Jayapal, one of the stalwart supporters of the bill, was instrumental in crafting the same legislation that passed in Seattle in 2014. She covers her ears to the criticism of the wage hike from workers and business owners in her own district and claims that the nation should follow Seattle’s lead. Jayapal seems to learn nothing from Seattle’s loss of worker’s hours, incomes and jobs when promoting the national wage hike agenda. There has been no mention of the results of the University of Washington study that found the wage hike actually reduces hours and incomes for low income workers in child care and other jobs. Her allegiance is not to constituents but to the labor groups who wrote the legislation.
Meanwhile, industry workers show support for tip credits across the country because they know that tips will start disappearing without them. They get it. They know that they already make above the minimum wage and, in most cases, far above $15. Workers also get that tipping has a cost of living increase built into it. As the cost of goods rises, menu prices rise, and so do tips because they are calculated as a percentage of a customer’s tab. Raising the minimum wage without acknowledging the tips system will ultimately stagnate workers’ incomes. Tipping culture gets choked out by the wage increase as employers try to navigate the hike by changing their pay models. Those changes often include eliminating tipping in favor of a service charge model or a stagnant wage.
Service workers in the past have stood by and watched as some of the most prominent restaurant owners in the country were jumping on board the anti-tipping train and employing these wage experiments. Many of these restaurateurs have since gone back to traditional tipping models because the experiment didn’t work. Danny Meyer, the famed owner of Shake Shack, fell into the One Fair Wage trap for his full-service restaurants. Believing Saru Jayaraman’s pitch of equality through the elimination of tipping, Mr. Meyer created a non-transparent pay model that caused him to lose 40% of his veteran staff. Ms. Jayaraman’s wage experiment restaurant, Colors, eventually failed, and Danny Meyer went back to tipping because he couldn’t make the numbers work, especially with the effects of COVID. There seems to be enough evidence by now that raising the wage on full-service restaurants, without consideration for tip wage income, explicitly fails.
But above all, the suggestion that President Biden will be reconciling the wage bill within the COVID stimulus package is an insult to workers. Just as governors in lockdown states are beginning to loosen dining restrictions, the Biden administration seems to be forcing the wage hike on a nation whose industries are crippled. Holding the stimulus part of the bill hostage by tethering it to the largest minimum wage hike our country has seen in modern times doesn’t do much to ease worker tensions or garner respect for the administration. Separating the bills and facilitating conversation regarding how such a hike would affect our devastated restaurant industry needs to be done.
A bigger conversation needs to happen on how the tip credit’s dismantling will affect tip wage workers. Reconciling the wage bill will mute any discussion leaving workers once again without a voice regarding their own livelihoods. Keeping worker’s concerns confined to Facebook posts and not hearing them would be a disgrace. The reconciliation action says to tipped workers in private-sector jobs that they don’t count and shouldn’t be heard. Democrats say they are for the working people. That train will have left the station if the Biden administration reconciles this bill without tapping into the pulse of the workers it will impact.