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What should waiters earn? The debate over the tipped wage

The Wall Street Journal. logo The Wall Street Journal. 6/14/2018 Rachel Feintzeig

Abby Dunn works as many as four shifts a week as a waitress at the Fainting Goat gastropub in Washington,  D.C., to supplement her income from a full-time job at a nonprofit. The 24-year-old is never sure how many nights’ tips it will take to cover her rent and student-loan payments.

“It’s kind of exhausting how unpredictable it can be,” she said.

In D.C., the minimum hourly wage for tipped workers is $3.33 an hour, compared with $12.50 for nontipped minimum-wage workers. (The latter rate is currently slated to rise to $15 by 2020.) But the dual scale could soon become history. On Tuesday, district voters will consider an initiative to eliminate the lower tipped wage and enact one minimum wage for all workers at the higher level.

And campaigns to boost the minimum wage for bartenders, wait staff and others who work for tips are gathering steam outside D.C., leading some business owners to worry about rising costs.

Gov. Andrew Cuomo has asked New York state’s department of labor to study a change similar to the one D.C. is weighing. In Michigan, a coalition that includes advocacy group Restaurant Opportunities Centers United, recently submitted thousands of signatures in an effort to put a one-minimum-wage initiative on the ballot in November.

Seven states, including Washington and California, have a single minimum wage. In the other 43, tipped workers are paid less on an hourly basis, though their tips are expected to make up the difference.

Not everybody working for tips favors higher base pay. Bianca Brancella, 26, said she struggles to make her rent and car payments as a $5-an-hour Pizza Hut waitress in Rockland, Maine, but she is against a higher minimum wage.

“Forget it,” she said. “There would be no tips.”

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In November 2016, Maine voters approved boosting the tipped minimum wage in a move that eventually would have given workers $12 an hour. About six months later, state legislators rolled back the initiative as complaints poured in from companies worried about ballooning labor costs and from some tipped workers who said customers didn’t leave as much gratuity after the vote.

“You’re looking at almost a doubling of your wages for most of your employees,” said Joe Kefauver, who advises restaurants on public-policy issues as a managing partner of Align Public Strategies LLC. “That’s why they’re freaking out.”

As Seattle increased its minimum wage to $13 in 2016 from $9.32 in 2014, hours in low-wage jobs fell by about 9% as employers cut back on shifts for existing workers and decided not to hire new ones, according to a University of Washington paper released last year. Overall, low-wage employees’ earnings fell by an average of $125 a month, the paper said.

Companies typically deal with minimum-wage increases by cutting back on labor, boosting prices and trying to automate, said Ekaterina Jardim, a postdoctoral research associate at the university and an author of the paper.

“Some restaurants will be able to survive. Some won’t,” she said.

Roger Hewitt, owner of Red Hawk Bar and Grill in Ann Arbor, Michigan, is worried about the possibility of a single higher minimum wage. “It could well put me out of business,” he said.

Mr. Hewitt is considering raising menu prices if Michigan brings in a unified minimum wage—possibly by 20%—but he doesn’t want to put off guests of his casual restaurant. “There’s a limit to how much people will pay for sandwiches and burgers,” he said.

At Service Bar in D.C., which dishes up cocktails and comfort food like fried chicken, staffers come in hours before opening time to refill syrup bottles, carbonate beverages and cut up garnishes. “We can’t have 7.5 hours of setup on our clocks paying $15 an hour,” said owner Chad Spangler.

If the D.C. initiative passes, Service Bar might trim costs by sending some servers home early and making guests order at the bar in lieu of table service, Mr. Spangler said.

Some restaurants facing higher labor costs might cut down on wait staff by installing electronic menus at tables for ordering, said Michael Lynn, a professor of food and beverage management at Cornell University. Still, the workers “who keep their jobs will make out like bandits,” he said.

Mr. Lynn’s research finds that tipping isn’t substantially different in states where there is one minimum wage. Add higher hourly pay, plus the fact that many guests will be tipping on bigger checks thanks to menu price increases, and workers potentially have a lot to gain, he said.

Boston bartender James Lamont returned to Massachusetts last year after several months in California. He found that it takes 40 hours a week on the East Coast to make the same money as he did in 33 hours a week on the West Coast.

California has a single minimum wage of $11 for tipped and nontipped workers at companies with 26 or more employees. A bill before the Massachusetts legislature would increase the tipped minimum wage, currently $3.75 an hour, to $15.75 by 2025.

“I’d much rather have my employer be responsible for paying me a living wage instead of essentially scrounging for handouts from the guests in the restaurant,” Mr. Lamont said.


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