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Tipoff

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Tipoff

The proposal to eliminate the minimum-wage exemption for tipped work is driven by organized labor, not employees. July 2, 2018
Economy, finance, and budgets

On June 19, voters in Washington, D.C. passed Initiative 77, eliminating the “tipped minimum wage” that allows businesses whose workers earn gratuities to pay those employees below minimum wage. This exemption—common throughout the nation—operates with the expectation that workers will make up the difference with tips, but also required employers to make up the shortfall if they don’t. Good workers who rely on gratuities relish the opportunity to turn superior effort into greater earnings, and fair-minded customers readily reward that effort. But efforts are underway nationwide to eliminate this arrangement in favor of a standard wage unrelated to performance, with the stated goal of lifting tipped workers out of “poverty” and protecting them from a system that puts them at the mercy of their customers’ generosity.

The driving force behind the D.C. initiative was Restaurant Opportunities Centers (ROC) United, a group backed by organized labor as part of an effort to unionize the restaurant industry. Their May 2016 report portrays ROC United as an extension of the “Fight for Fifteen,” a labor-backed movement to increase the minimum wage nationally. The report claims that tipped workers live in poverty as a result of tipped minimum-wage laws, but more than that, ROC claims that the restaurant industry is plagued by sexual harassment and exploitation as a direct result of the minimum-wage exemption. The report claims that “over 90 percent of D.C. restaurant workers surveyed reported experiencing some form of sexualized behavior while at work, and 93 percent of all workers were bothered by these behaviors. Fifty-three percent of tipped workers reported that depending on tips had led them to accept inappropriate behaviors that made them nervous or uncomfortable at work, and 39 percent reported that being touched inappropriately is a common occurrence in their restaurant.”

Supporting these claims is ROC’s own 2014 survey of 688 current or former restaurant workers in 39 states, buttressed by an additional 26 surveys collected in D.C. There are an estimated 14.7 million restaurant workers nationwide, representing 10 percent of the entire U.S. workforce, so it’s inexplicable that their organizers could gather only 714 surveys as a database for such a serious claim about industry working conditions. Given the paltry sample, it’s no surprise that the report focuses on percentages when presenting evidence, adding anecdotal blurbs for effect.

While hospitality workers do report a disproportionate number of workplace sexual-harassment complaints, the connection between harassment and tipped minimum wage laws is not demonstrated. In fact, ROC insists that the demand to increase the tipped minimum wage will not lead to reduced tips, or to abolition of the gratuity system. But if working for tips forces female servers to endure harassment and abuse, as the advocates claim, why not abolish tipping and let restaurant workers earn a straight salary, as they do in other countries? Some restaurateurs, like Danny Meyer of the Union Square Hospitality Group, have eliminated tips in their establishments, and include a hospitality charge in their prices. Meyer favors this approach from the perspective of fairness, though it is worth noting that he now has trouble retaining waiters.

The lineup of opponents to the elimination of the tipped minimum wage in New York makes an amusing mix of bedfellows: restaurant owners, the Chamber of Commerce, Al Sharpton, and the workers themselves are against it. On the other side stand organized labor and Governor Andrew Cuomo. Academic opinion on the effect of eliminating the minimum-wage exception is mixed. A 2015 Cornell study suggested that a small hike in minimum wage for tipped workers does not lead to job losses; a 2016 paper by the Census Bureau’s  Maggie Jones concludes that higher wages get offset by a decrease in tips. An earlier study found a slight increase in workers’ earnings, coupled with a slight reduction of jobs. The analysis may be inconclusive, but those pushing the elimination of the tipped-worker wage exemption have reached the conclusion that the exemptions leave tipped workers in penury and subject to exploitation. Curiously though, they don’t make the same claim about minimum-wage workers in general.

Waiting tables and tending bar are attractive options for many people who don’t have advanced skills or training. Unlike much salaried work, waiting rewards effort and good service with cash-in-hand. It’s commonly known and accepted in the hospitality industry that tipped workers often declare only as much in gratuities as can be considered plausible, and few on the political spectrum begrudge letting servers keep the wad of dollars they’ve earned after a long shift. The forces looking to disrupt this uniquely American arrangement have an eye on organizing workers and collecting union dues; the other prime beneficiary would probably be the IRS. If the workers and their employers agree that the existing system works, here’s a tip for the politicians: don’t fix what isn’t broken.

Photo: Ivan Bajic/iStock

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