Column: Minimum wage push bad for servers
It’s a solution in search of a problem. And it may be coming soon to a ballot box near you.
The Restaurant Opportunities Center (ROC), a controversial advocacy group with a checkered past, announced this week that it’s collecting signatures for a ballot measure that would raise the state’s tipped minimum wage by an eye-popping 240 percent, while also raising the overall minimum wage to $12 an hour.
Residents can be forgiven for questioning the need for such an initiative. After all, Michigan’s minimum wage is already rising; it’s up 20 percent in the last three years, and is higher than the wage requirement at its immediate midwestern neighbors. The reason for the initiative has nothing to do with economics, and everything to do with ideology.
Like most other states in the country — not to mention the Internal Revenue Service — Michigan’s labor law recognizes tips as income earned on the job. Servers are paid a base wage by employers, and guaranteed to earn the same $8.90 minimum wage as all other employees when tip income is included. (The difference between the base wage and the full minimum is called the tip credit.)
Census bureau data show that most servers earn considerably more than minimum wage when tips are accounted for; many self report $24 an hour or more. In those rare instances where tips don’t equal the full minimum wage, employers are legally-required to make up the difference.
A handful of states have deviated from this popular status quo — often to the detriment of the employees themselves. A 2014 Southern Economic Journal study of states that raised their tipped wage requirement found that restaurant employment fell afterwards. A more-recent 2017 study from scholars at Harvard Business School and Mathematica Policy Research found an elevated rate of restaurant closures in San Francisco associated with its quickly-rising tipped minimum wage. (One food industry publication described the dramatic rate of Bay Area restaurant closures as a “death march.”)
Given these documented consequences, why raise the minimum wage for employees who already earn far more than that in tips? One reason is workplace union organizing. Labor unions that ROC partners with on these initiatives would prefer to eliminate tipping entirely; the bi-weekly paycheck for most servers would be smaller, but it facilitates union dues collection in a way that tip income does not.
ROC’s recent failed history in trying to spread its ideas elsewhere is instructive. Last year, the group slipped language eliminating the tip credit into an initiative to raise Maine’s wage floor to $12 an hour. The measure passed, but subsequent polling revealed that many “yes” voters had no idea about the tip credit elimination.
If Maine voters were surprised, the state’s restaurant servers were outraged: They understood better than anyone that a drastic hike in the tipped minimum wage would put their jobs and income at risk. Over 4,000 of them organized under the banner of Restaurant Workers of Maine to preserve the current tip credit; ROC couldn’t marshal similar support for its agenda because it didn’t exist. The grassroots anger from servers convinced a bipartisan group of legislators to undo the harmful tip credit provision.
This isn’t just a policy question for me — it’s also personal. My first job was bussing tables at a restaurant at Canterbury Village in Lake Orion; I later waited tables at an outpost of the Metro Detroit institution Kruse & Muer. It’s unlikely that either opportunity would have been available to me under the crushing wage requirement that ROC is now proposing. And it’s guaranteed that I would have earned less money had the tipped status quo not existed.
Fortunately for servers, the Michigan initiative's organizers are already demonstrating how out-of-touch they are. For instance, to kick off the campaign, they've recruited Lily Tomlin and Jane Fonda to speak at a number of events, including a private lunch where guests pay up to $500 to attend.
Michigan voters who are asked to sign in support of this ballot measure should treat the petition the same way they’d treat an undercooked meal: Send it back.
Michael Saltsman is managing director at the Employment Policies Institute.