To Pay Minimum Wage or Not? Debate Over Tipped Workers Heads to D.C.
There's a growing movement to eliminate the so-called tip credit for bartenders and servers. Washington, D.C., could be next to outlaw the practice.
The tip line on restaurant bills and bar tabs has become the new front line in the minimum wage fight.
In Washington, D.C., progressive activists successfully fought to put a ballot measure before voters in the city to do away with the so-called tip credit, which allows restaurants, valet services and bars to pay their employees $3.33 an hour -- far below the city's $12.50 minimum wage. If tips aren't enough to make up the difference, the employers themselves must cover the rest.
If the proposed measure, known as Initiative 77, passes on June 19, the tip credit would be phased out by 2025, and restaurant workers would be paid the city's minimum wage, which is set to rise to $15. Bartenders, waitstaff and valets could earn tips on top of the standard minimum wage.
Supporters of the measure contend the tip credit is nothing more than a subsidy paid by patrons to restaurant owners.
“Why should my tips go to subsidize the labor costs of a corporation?” says Diana Ramirez, deputy co-director of Restaurant Opportunities Centers United (ROC United), which bills itself as a national advocate for better wages and workplace conditions and is spearheading the effort to end the tip credit.
Meanwhile, a very vocal “Save Our Tips” campaign, backed by restaurant owners and supported by some bartenders and waitstaff in D.C., argues that eliminating the tip credit will cause employers' labor costs to jump by 220 percent.
“I don’t think [restaurants] will be able to survive,” Kathy Hollinger, director of the Restaurant Association of Metropolitan Washington, told WAMU public radio. “It threatens the very unique makeup of what we are all very proud of in this community, which is an industry that is made of small, local, homegrown restaurant operators.”
Some bartenders and waitstaff worry that eliminating the tip credit and replacing it with a standard $15 wage could effectively cut their wages. Advocates of Initiative 77 say that's only applicable for servers at fine-dining restaurants and trendy eateries.
“It is true that there are some positions in the restaurant industry where the income potential is $30 and $40 per hour, but that’s at top-grossing restaurants,” ROC United's Ramirez says. At chain restaurants and mom-and-pop diners, where the tips tend to be less generous, she says tips rarely compensate employees above the minimum wage.
According to ROC United's research, in the seven states that prohibit the use of the tip credit -- Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington state -- tipping hasn’t decreased.
According to research from the Economic Policy Institute, tipped employees in states that use the tip credit are twice as likely to live in poverty compared with workers in the seven states where that credit has been abolished.
ROC United’s efforts come on the heels of a nationwide push to raise wages for workers across all industries. That effort gathered steam in the wake of President Barack Obama’s 2013 State of the Union address, in which he called on Congress to raise the federal minimum wage to $9 an hour. It would have been only the second such increase in more than a decade.
Federal lawmakers rejected Obama's call to raise wages. In response, several state and local governments opted to raise wage rates on their own. Since then, 29 states and a handful of cities raised their minimum wage above the federal level, with many pegging the wage to inflation.
Both sides in the debate acknowledge that the current system is imperfect. Research suggests that tipping can encourage sexual harassment, lead to wage theft and contribute to preferential treatment of customers based on race. And as ROC United emphasizes in its arguments, tips can exacerbate a growing wage disparity between servers and back-of-the-house cooks and dishwashers.
A ballot measure similar to the Washington, D.C., initiative was approved by Maine voters in 2016. But after intensive lobbying efforts by restaurant workers and owners, state lawmakers passed a bill restoring the tip credit. Gov. Paul LePage signed it in 2017.
Polling in D.C. suggests voters will likely approve Initiative 77. In one poll, conducted in April, 70 percent of respondents said they support "raising [tipped workers'] base minimum wage so that they earn the same minimum wage as every other minimum wage worker."
But the majority of the D.C. City Council, along with Mayor Muriel Bowser, oppose the measure and would likely try to override it. (The council has the power to overturn the ballot measure if it passes.)
“I represent half of the restaurants in the city," City Councilman Jack Evans told WAMU. "There’s not a restaurant I go to where both the head of the restaurant and all the waiters don’t surround me and say, ‘Please don’t let this go into effect.' In listening to my constituents, I haven’t found anybody who supports the thing.”