The Growing Movement to Eliminate the Tip Credit - The American Spectator | USA News and Politics
The Growing Movement to Eliminate the Tip Credit

By placing Initiative 77 on the ballot for this June, D.C. joins a growing movement aiming to eliminate the “tip credit” (the difference between the general minimum wage and the base wage that restaurant owners must pay their servers) and require restaurant owners to pay their servers the minimum wage. Seven states and Guam have already eliminated the tip credit, while many more states maintain a tip credit but mandate a minimum wage for tipped employees that is higher than federally mandated. New York has also been engaged in high-profile hearings over the elimination of the tip credit. Yet while D.C. and New York consider eliminating the tip credit, it remains doubtful that restaurant workers even want this reform. Eliminating the tip credit would likely raise prices, curtail economic growth in the food service industry, and harm the very servers it aims to help.

States with a tip credit allow restaurants to pay their servers a base wage that is below the statewide minimum wage, so long as their combined wage and tip income reaches a certain threshold. Advocates of eliminating the tip credit claim that doing so would raise server pay, and minimize the sexual harassment that servers face.

The potential harm to restaurants from a higher minimum wage for servers is clear. Restaurants operate on thin profit margins — though they have grown in recent years, the average full-service restaurant’s profit margin hovers around 6 percent. A 350 percent raise, such as D.C.’s Initiative 77 is proposing, would be tough to fit in such a narrow profit window.

But does the tip credit harm server pay? The servers themselves certainly don’t seem to think so. While it may seem odd for workers to be arguing against a raise, tip credits increase the amount of money that customers are willing to spend at a restaurant. Customers see a $40 bill as being more than a $35 bill with a $5 tip being added on, in large part because the tip is under their control and viewed as being more of a personal favor to a server than a payment to a faceless restaurant. In New York City, a survey of nearly 14,000 servers found that those servers made an average of $25 an hour after tips — hardly the picture of an industry desperately in need of fundamental reform.

Organizations of servers supporting the tip credit, notably the Restaurant Workers of America (RWA), have sprung up in response to this assault on the status quo. RWA was born out of success in restoring a tip credit to Maine, deciding to take its fight nationwide. Yet others have banded together to oppose tip credit changes in their states. When celebrities such as Natalie Portman and Reese Witherspoon publicly called for eliminating the tip credit in New York, 500 New York servers wrote an open letter admonishing them. A petition to support the tip credit in New York has over 8,300 signers as of this writing.

While the tie between sexual harassment and tipping is still under debate, it is undoubtedly the case that no server should have to tolerate sexual harassment for tips. Yet this represents a broader cultural problem, and the path to solving it lies outside of reducing worker pay. Forcing servers to earn less money in an effort to help them is misguided at best, and patronizing at worst.

While most activists pushing for the elimination of tips genuinely believe they are helping servers, some restaurant workers see a more self-interested motivation. Because union workers dislike paying dues out of their tips, unions prefer higher base wages, enabling them to increase dues payments.

Regardless of the reason, D.C. and New York should take into account the sentiment of tipped workers when they consider eliminating the tip credit. Servers believe they can make more money with tips than without them — a belief that reflects well on the service that restaurant workers provide. Servers who take pride in their work deserve the chance to earn higher wages from appreciative customers, and states should not stand in their way.

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