The Tipped Minimum Wage Bill

[SeanMike]

Earlier today Boundary Stone tweeted that you should "ACT NOW" against the Tipped Minimum Wage bill:

https://twitter.com/BoundaryStoneDC/status/402856058005114880

That set off some outrage, and Fritz Hahn pointed out that it's the RAMW's position:

https://twitter.com/fritzhahn/status/402889195645333504

I don't know anything about the bill at all. I'm about to start Googling. That being said, I'd be interested what other people think of this situation. My gut instinct is to support the bill, but it'd be interesting to see (for instance) what bars I visit that pay under the new minimum amount and which pay more...

EDIT: here's a link to the Washington City Paper article about it:

http://www.washingtoncitypaper.com/blogs/looselips/2013/11/18/group-wants-a-minimum-wage-ballot-initiative/

Edited November 25, 2013 by DonRocks

[deangold]

A restaurant or bar pays FICA and medicaid/medicare on a server's tipped income and may not legally deduct this from the revenue stream of tips.  If you charge a service charge, you may pay these amounts out of revenue.  You have to keep written documentation that a tipped employee make the amount of the tip credit used or more.  That is, we document that our tipped employees make more than the minimum wage for their work when we use the amount of tips they report.  We also document the tip out to the tip-pooled staff. 

[SeanMike]

An interesting response to some of the claims mentioned in previous articles:

http://www.dcfpi.org/a-few-more-tips-on-the-tipped-minimum-wage

[ktmoomau]

I think this is probably not a subject meant for a 140 character limit on either side, it definitely is a complex issue to explain and understand.

[darkstar965]

Agree with ktmoomau that this is a complex issue wholly unsuited to twitter.  That said, I think there are three core issues among others:

1.  The point of a minimum wage is to ensure basic fairness and enough to 'make a living' in the plain English sense of the phrase

2.  There has always been--and likely always will be--difficulty in getting accurate data due to variable reporting efficacy.  Tips are too easily hidden from proprietors and taxing authorities and, because so many servers struggle to earn enough, the temptation to conceal tips is both high and understandable.

3. Different from some other countries, owners and servers in the US often view the role as transitional or as something to do while focusing on something else like earning a degree.  Truly "professional" career servers are more exception than norm.

[DonRocks]

Not surprisingly, Clyde's is siding with RAMW.

Source: DCist Food

Clyde's Restaurant Group "” Image: Facebook

DCist reports that Clyde's Restaurant Group, which owns Clyde's, 1789, Old Ebbitt Grill, The Tombs, and The Hamilton, sent an email to its employees asking them to sign a Restaurant Association of Metropolitan Washington petition to the DC City Council against the tipped minimum wage bill. Follow the link for the full text of the email.

Read full article >>

[darkstar965]

Not surprisingly, Clyde's is siding with RAMW.

If the petitions are public, this is wrong on several levels. Most of all, the requestor (management/ownership) has all the power in the relationship so, if they're able to track which employees sign/don't sign the temptation to retaliate in a range of possible ways is too great. Whatever one's feelings about the legislation, they should be free to express or not express their views in whatever forum they favor without any risk of harm.

[Mark Slater]

DC is considering raising the minimum wage to $11.50 an hour and the tipped minimum to $8.25. Of course big business is against this. The tipped minimum has remained the same for more than 30 years. Telling waiters and bartenders to vote against something that will actually pay their withholding taxes and FICA instead of taking it from their tips is like telling people that universal healthcare is bad for them and takes away their "freedom".

[DonRocks]

This is all going to be a zero-sum game in the end.

Diners aren't going to pay any more.

Restaurateurs aren't going to make any less.

Servers aren't going to make any more.

The logical end-point (and quite frankly, the only outcome that I see as being possible) is going to a service charge-based system.

[Toogs]

2.77 to 8.25 is profoundly stupid.

Tipped MW should be pegged to MW.  It looks like it hasn't gone up for a long time--I think it was 2.13 last time I worked at that rate, and minimum wage was something like 5.50 at that time.

[DanielK]

Toogs - the tipped wage was set to $2.13 back when the minimum wage was set to $3.25. If they're pegged by percent, moving the MW to $11.50 would still bring the tipped MW to $7.50, so this isn't going that much further.

[Toogs]

Toogs - the tipped wage was set to $2.13 back when the minimum wage was set to $3.25. If they're pegged by percent, moving the MW to $11.50 would still bring the tipped MW to $7.50, so this isn't going that much further.

I realize I didn't properly parse my thoughts above.

It's an unfair shock to businesses to overnight triple it.  Assuming the MW hike to 11.50 is fair (which is a conversation for another thread/board) 8.25 could possibly be fair, but there is no way it's fair to the owners to do it suddenly like what is being proposed.

[DanielK]

I realize I didn't properly parse my thoughts above.

It's an unfair shock to businesses to overnight triple it.  Assuming the MW hike to 11.50 is fair (which is a conversation for another thread/board) 8.25 could possibly be fair, but there is no way it's fair to the owners to do it suddenly like what is being proposed.

MoCo just announced they're going to raise, and stepping it over 3 years, so maybe this is the better solution for both.

[Jeff Heineman]

This is all going to be a zero-sum game in the end.

Diners aren't going to pay any more.

Restaurateurs aren't going to make any less.

Servers aren't going to make any more.

The logical end-point (and quite frankly, the only outcome that I see as being possible) is going to a service charge-based system.

Don,

Please explain yourself. Given that wages are going up (not a bad thing on many levels), and your assertion that diners will not be paying more, how, pray tell, will restaurateurs not make less?

I am not an accountant but have a working knowledge of GAAP, and having seen a P&L a few times, and this is an impossible scenario. I feel it is much more likely that diners will indeed pay more. I don't think it will happen overnight, but you will likely see prices creep up over time. Restaurants have worked hard to not jack prices in the face of escalating food costs and any labor cost increases will eventually be passed on. No one may want to, but accountants, investors and bottom lines create some pretty strong arguments.

[DonRocks]

Don,

Please explain yourself. Given that wages are going up (not a bad thing on many levels), and your assertion that diners will not be paying more, how, pray tell, will restaurateurs not make less?

I am not an accountant but have a working knowledge of GAAP, and having seen a P&L a few times, and this is an impossible scenario. I feel it is much more likely that diners will indeed pay more. I don't think it will happen overnight, but you will likely see prices creep up over time. Restaurants have worked hard to not jack prices in the face of escalating food costs and any labor cost increases will eventually be passed on. No one may want to, but accountants, investors and bottom lines create some pretty strong arguments.

Prices will go up for the diners, who will subsequently leave less tip, or "service charge." There's no way that servers will be making more money than they already do - the best servers can hope for is an "unbalanced market" in the short term, where not all restaurants catch on at the same time.

There's no other possible way for this to succeed.

1) Diners absolutely will not pay more than they currently are. Restaurants have gotten ridiculously expensive in recent years. If prices continue to rise, I'm going to start opting out, and when *I* opt out, you can rest assured that everyone will opt out because I'm the most loyal customer there is. Even now, I'm starting to "think" about shopping and cooking more than I do because the amount of money I could save would be enormous.

2) Restaurateurs - assuming they operate on the paper-thin margins they claim - will not accept less revenue. Maybe a *little* less, but not much.

Given the above two conditions, there's nothing extra to pay servers with. Servers will make a higher base salary, and less tips, resulting in no extra income. Period. There is no other possibility. The onus is going to be placed on the restaurateurs to explain this situation to the diners in a "palatable" fashion.

There will be footnotes at the bottom of the menu saying things such as: "We now charge a 20% service charge on the pre-tax amount in order to pay our staff a living wage, and we are no longer asking diners to leave tips." And yes, there will be unscrupulous restaurateurs that will gladly take both, essentially bilking foreign tourists, etc.

They *could* in theory, simply raise the prices on the menu by 20%, instead of charging a service charge, but that's risky business in terms of consumer psychology. I, personally, would actually prefer this because it more correctly assigns the cost to the product, but I don't think it will happen. You don't want to be selling a pork chop for $23.99 when someone down the street claims to be selling theirs for $19.99 (adding a 20% service charge), even though it's the exact same money out of the diner's pocket. The general public is stupid, and is unable to see the equivalence in these two scenarios.

The early converters will lose servers to other restaurants, under the naive assumption that these other restaurants won't turn around and do the same thing three months later.

Things could be quite chaotic for the first few months or years, but the market will equilibrate, and what I'm proposing will be the state of affairs. Guaranteed.

I've said it many times before, and I'll say it again: other than Chefs de Cuisine, GMs, and Head Bartenders, servers are the highest-paid non-equity employees in the organization. It's the AGMs, the dishwashers, the runners and busers, and the line cooks who need more money; not the servers.

This whole minimum wage thing is nothing more than a reorganization of existing monies. And as I've said before, I will throw all my support behind any restaurant that refuses tips, and instead levies an 18-20% pre-tax service charge. Given all the horror stories I hear about "those cheap bastards from Bethesda" that leave 10% tips, this might actually increase revenue to restaurants. Yeah, it will eliminate the big spenders, so places like Cafe Milano might suffer, but this is a big-picture scenario I'm discussing.

[Toogs]

From the parts I heard, not much new ground was covered, but there was a panel discussion of this on Kojo today.

http://thekojonnamdishow.org/shows/2013-12-11/tensions-over-tipping-restaurant-workers