On June 19, residents of Washington, D.C. will vote on a ballot initiative that promises to abolish the tipped minimum wage for servers, and to mandate that restaurant owners pay their wait staff the district’s minimum wage (scheduled to rise to $13.25 June 1) on top of whatever tips they earn. The principle supporter of the initiative, the union-backed Restaurant Opportunities Center D.C., has argued that such an abolition will accomplish two goals: Ensuring servers earn a stable salary and removing the need for waitresses to endure sexual harassment for tips. According to the Washington Post’s editorial urging voters to reject the initiative, ROC-DC’s pitch has convinced the voters, and “many expect the proposal to win.”
While ROC-DC has identified real problems with the server-compensation model, the remedy it offers ignores persistent economic realities in favor of idealistic ideas about “wage justice.” The Post’s editors were right to quote every capitalist’s favorite phrase, “there’s no such thing as a free lunch,” in defending their disapproval of the measure; its implementation would certainly require restaurant owners to raise meal prices. But such a change stands to hurt more than just consumers and business owners: If Initiative 77 wins, servers will likely see a cut in pay and hours worked, if they survive the inevitable downsizing and restaurant closures.
At first glance, the tipped minimum wage seems ridiculously oppressive: According to Department of Labor statistics, in 24 states and Puerto Rico, servers receive less than $3.00 per hour, and in another twelve states and D.C. they make less than $5.00 per hour. Just ten states have a tipped minimum wage higher than the federal minimum wage of $7.25. Indeed, the very name, “tipped minimum wage,” implies that if a waitress receives $0 in tips during one eight-hour shift, she could take home as little as $24. The reality, though, is quite different: Federal law mandates that her employer pay the difference between the federal minimum wage and the tipped wage plus her tips that night.
Because the tipping model in the United States reflects the incorrect assumption that servers’ wages are based on tips, servers tend to wind up making significantly more than the federal and state minimum wages. In Hawaii, for example, where the tipped minimum wage is $9.35 and servers must be paid at least $10.10 per hour, the average server makes $21.77 per hour, according to the latest data from the Bureau of Labor Statistics. The lowest server wage by state or territory is Puerto Rico, where servers make $8.57 per hour — still higher than the federal minimum wage. In D.C., the tipped minimum is $3.33, and servers must reach at least $12.50 in practice, but the average wage is a whopping $17.48, more than $4.00 higher than what Initiative 77 promises.
There are commonsense ways to address problems in the restaurant business, but Initiative 77 isn’t among them.
Supporters of the initiative make a good point: How can we be sure that all servers, and not just more than a certain percent, are receiving at least the minimum? It’s possible, after all, for servers to be underpaid by employers who pressure them to over-report tips. Presumably, Initiative 77 would end this practice, or at least make it significantly harder for employers to get away with. But it would do so at a cost, lowering most servers’ annual take-home wage in the process, thanks to restaurant closures, downsizing, and shift cuts made necessary by the new economic burden on owners.
A Harvard study of the Bay Area found that every $1 increase in the tipped minimum wage caused a 14 percent increase in the likelihood an average area restaurant would close. The Employment Policies Institute found that a similar initiative that may be on the ballot in Michigan this November would cost 14,000 server jobs. Moreover, if a server were fortunate enough to survive the job loss and restaurant closures, he still might have to deal with a decrease in his hours: In 2011, while Congress was debating the federal WAGE Act, an EPI study found that for every 10 percent increase in the tipped minimum wage, individual employees would work about 5 percent fewer hours.
Joe’s Crab Shack, a nationwide seafood chain, is a model for the threat Initiative 77 poses to consumers, restaurant owners, and servers. The chain tested a no-tipping policy in August 2016 with a trial run at 18 of its restaurants, but after just four months of the higher-priced, gratuity-included menu the new policy required, the restaurant’s management quickly reinstated tipping and the normal menu. Parent company CEO Bob Merritt explained that customers “voted with their feet,” fleeing the struggling restaurant in protest of the higher prices. The trial also revealed something sort of surprising: Customers reported a preference for tips because they give a restaurant’s owner greater incentive to let servers keep what they earn.
Indeed, Initiative 77 would make servers’ keeping tips a fantasy, as owners would have to skim tips to afford paying the increased tipped minimum wage. Thad Volger, owner of two San Francisco restaurants, tried out the tip-skimming model in 2016 to accommodate the city’s march toward a $16 minimum wage. While his servers were making between $25 and $40, some on his untipped kitchen staff were making as little as $13, meaning he was forced to find extra money to comply with the law without firing staff. As Volger found out, fleeing customers were the least of his worries. He told NPR in May 2016 that he was forced to restore the normal model after losing servers, who weren’t willing to take a pay cut.
As for the attractive argument that Initiative 77 will decrease the incidence of server harassment by customers? It doesn’t stand up to scrutiny. After all, the initiative doesn’t ban tips; it only eliminates an incentive for tipping based on the grounds that it’s essential to the compensation system. How would this change the behavior of the tipping customer who sees his excess contributions as a means of soliciting sexual interest from a server?
Initiative 77’s supporters have done a great disservice to the district’s servers by appealing to pathos and emotion over cold-eyed analysis. What D.C.’s servers need, and what D.C.’s voters should demand, is legislation that punishes customers who use tips to harass servers and employers who underpay them. There are commonsense ways to address problems in the restaurant business, but Initiative 77 isn’t among them.