President Biden’s $1.9 trillion coronavirus relief package wouldn’t just boost the minimum wage. It would completely overhaul how tipped workers are paid with a restaurant industry struggling to claw its way back from COVID-19 restrictions and shutdowns.
Restaurateurs fear the move would squeeze the industry’s tight profit margins and put an unnecessary strain on the still-sputtering economy.
House Democrats’ plan would more than double the minimum wage for tipped employees this year, to $4.95 per hour, before ultimately equalizing it with their proposed hourly $15 minimum wage by 2027.
Dina Rubio, the owner of Don Ramon Restaurant in West Palm Beach, Florida, said she fears she might have to lay off staff or increase her prices if the package becomes law.
“This is another obstacle that we’re going to have to see how we’re going to be able to manage,” she said.
The National Restaurant Association says the combination of negatives they see in the proposal outweighs the positives in the rest of the package, such as the billions of dollars in aid for restaurants and bars.
“There is not an economist yet who has offered that an increase in the minimum wage and elimination of the tip credit is going to result in more restaurants expanding operations or opening their doors,” said Sean Kennedy, the group’s executive vice president for public affairs.
At least 110,000 restaurants have closed and 2.5 million jobs have been lost as a result of the pandemic, Mr. Kennedy said.
Employers are supposed to make up the difference if employees’ tips don’t bring them in line with the standard minimum wage — known as the “tip credit” — but enforcement of that law is scattershot.
The tip credit would be eliminated by 2027 under the Democrats’ plan.
Mr. Kennedy said the average server makes $19 to $25 an hour, including tips, and their wages could be slashed if they are equalized too quickly.
He said the restaurant industry is willing to have a broader conversation about wages but now is not the time to impose drastic changes.
“A quick increase — five years to $15 [an hour] and a quick elimination of the tip credit — the restaurant industry cannot support that,” he said.
Advocates of abolishing the tipped minimum wage say the structure of the “sub-minimum wage” has exacerbated racial inequities during the pandemic.
“Tipped work is a legacy of slavery,” said Liz Theoharis, co-chair of the Poor People’s Campaign. “Someone has been hurting our people, our workers and our tipped workers. It’s gone on for far too long, and we won’t be silent anymore.”
A report this month from the advocacy group One Fair Wage found that Black tipped workers were more likely than workers overall to get lower tips and were more likely to face punishment for trying to enforce social distancing and mask rules in their workplaces.
Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington have increased their tipped minimum wage to the same level as their standard minimum wage with some exceptions, all but ensuring that the earnings floor for many tipped workers is higher.
Waiters and bartenders in states where the tipped minimum wage was still $2.13 per hour made almost 17% less than their counterparts in other states, according to a 2017 study from the left-leaning Economic Policy Institute.
Democrats say that is exactly the point of equalizing wages.
“It’s time to get rid of sub-minimum wages — period,” said Rep. Andy Levin, Michigan Democrat. “It’s time for every American worker to earn at least $15 an hour.”
The Congressional Budget Office reported this month that House Democrats’ plan, which includes eliminating the tipped minimum wage and increasing the overall minimum wage from $7.25 to $15 an hour by 2025, would cost 1.4 million jobs, though it would lift roughly 900,000 people out of poverty.
Democrats’ dreams of increasing the wage soon might have to be put on hold.
Sen. Kyrsten Sinema, Arizona Democrat, has signaled opposition to including the wage measure in the relief package, which likely would doom the effort in the 50-50 Senate.
White House press secretary Jen Psaki said Mr. Biden “remains committed” to raising the wage but added that the legislative process has a long way to go.
When the minimum wage issue arose at the confirmation hearing of Neera Tanden, Mr. Biden’s pick to lead the White House budget office, Sen. Lindsey Graham, South Carolina Republican, confronted her about whether she had ever run a restaurant.
Ms. Tanden said she had not, but she added that it would be useful to talk with restaurant servers who would be affected by the policy.
“I think doing away with the tip wage is probably bad for them,” Mr. Graham said. “The best thing you can do for a waiter and a waitress is open up a new restaurant and people hire you at higher wages because a new restaurant in town needs good workers, so that’s the way I believe to increase wages.”
In 2018, the D.C. Council voted to repeal a voter-backed initiative to eventually bring the tipped minimum wage in line with the standard minimum wage in the city.
Mr. Kennedy said it was servers who drove the push to reverse the change.
“It wasn’t driven by the restaurant industry. It’s driven by the men and women who appreciate and understand the business model of what the tip credit and what the restaurant model means for them,” he said.
The minimum wage in the nation’s capital is now $15 per hour, and the base minimum wage for tipped employees is $5 per hour.
In 2019, New York Gov. Andrew Cuomo, a Democrat, announced a plan to eliminate the tipped minimum wage in his state for some vocations, including hairstylists and parking lot attendants, but not those in the hospitality industry.
The overall minimum wage in New York City is $15 per hour. It is being phased in gradually for other regions in the state.
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