Should Restaurants Pay Servers Minimum or Tipped Wages?

Cities around the country are grappling with this question: is it better to pay servers minimum wage, or a tipped wage?

And their answers couldn’t be more different.

In Washington D.C., a movement backed by the National Restaurant Association and the Metropolitan Washington Area Restaurant Association called No 77 is fighting against legislation that would incrementally raise tipped employee wages to meet the District’s minimum wage by 2026.

They argue that raising server’s wages to meet the minimum wage would lead to layoffs, increased costs, and make it more difficult to build safe, sustainable working environments.

However, an analysis by the Economic Policy Institute (EPI) shows that workers living in states with a tipped minimum wage policy are more likely to live in poverty than workers who make minimum wage.

Cities such as Seattle and San Francisco have already eliminated tipped wages and instead charge a service fee to customers.

The same EPI study found that servers and bartenders in San Francisco and Seattle make more money than their counterparts in D.C.

As for the point made about restaurants having to raise prices to accommodate labor costs, EPI found that restaurants in states with equal wage legislation (where tipped employees make minimum wage) are able to “absorb additional labor costs through increases in productivity, reductions in turnover costs, compressing internal wage ladders, and modest price increases.”

These modest price increases typically amount to 50 cents per plate.

But, the money a tipped employee leaves with at the end of the night and the effect it has on a restaurant is only half of the discussion. We also need to talk about wage theft.

84 percent of restaurants investigated by the Department of Labor for wage theft violations were found to be ignoring requirements to ensure employees make the state’s minimum wage when tips are included in their wages.

This caused tipped employees to lose nearly $5.5 million in wages in 2015.

Paying tipped employees a minimum wage would help eliminate many of the wage theft cases brought against restaurants because the regulations securing minimum wages are much more stringent than those supporting tipped wage policies.

Putting more money in the hands of minimum wage workers is also good for local economies. Minimum wage employees are more likely to spend money at local establishments because they can anticipate the amount of money they will make in a month.

Conversely, tipped employees are more likely to save their money because of the uncertainty of their wages.

In my opinion, paying tipped employees a minimum wage is a low-cost high-reward policy more restaurants should adopt. Paying out a higher percentage for labor isn’t a death sentence for your profitability. In fact, it can be the opposite. Happier employees make more engaged employees. And that engagement will trickle down to customer satisfaction.


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