Column: Let servers keep their tips
Detroit’s burgeoning restaurant scene has been the subject of national attention. But a proposed ballot measure to raise the base for restaurant servers by more than 200 percent threatens to halt to the restaurant industry’s growth in Detroit and beyond.
Start with some background: Michigan’s minimum wage was raised to $9.25 in four steps starting in 2015, as part of a bipartisan deal between Republicans and Democrats in the state legislature. This increase covered all employees, including tipped restaurant employees; if tips plus the required base wage doesn’t equal at least the full state minimum wage, employers are legally required to make up the difference.
The state’s minimum wage compromise wasn’t sufficient for the Restaurant Opportunities Center, or ROC, a controversial New York-based labor organization. ROC got its start more than a decade ago protesting outside of non-union restaurants in Manhattan; in recent years, it’s best known for directing big checks from left-of-center donors toward a national agenda to eliminate the “system of tipping.”
ROC has raised over $1 million to advance this goal in Michigan, collecting signatures for a ballot measure that would raise restaurants’ waitstaff labor costs by nearly a factor of four. Similar increases in other states have forced any number of consequences; in New York, for instance, Labor Department data show that over 270 restaurants were forced to close their doors following a 50-percent hike in the tipped wage at the end of 2015.
In some states, the Census Bureau reported that “lower tips” had “offset” the higher base wage for servers. Other restaurants have been forced to embrace “gratuity-included” (i.e. no-tipping) service models, where much-higher menu prices help fund a higher base wage for waitstaff, who no longer receive tips. New York restaurateur Danny Meyer helped popularize this model with the press, but it wasn’t nearly as popular with his staff — roughly a third of whom left for greener pastures after he made the change.
The anecdotal proof of tipped wage harm is supported by empirical evidence. A new analysis by economists at Trinity University and Miami University finds that Michigan would lose as many as 14,000 full-service restaurant jobs by the time ROC’s proposed tipped wage increase is phased in. Roughly 45 percent of the estimated job loss (approximately 6,000 jobs) would be in the Detroit area.
An industry impact of this magnitude is consistent with recent experience. One full-service restaurateur in New York City explained in a Fox Business interview that he had cut roughly 1,500 people from his staff (from 4,000 down to 2,500) since his state started its tipped wage experiment. That’s one employer, and in response to an increase that’s a fraction of the size that ROC wants to enact in Michigan.
If it’s too extreme for one of the world’s biggest cities, then it’s the height of irresponsibility to contemplate a similar policy for Detroit or Grand Rapids or Ann Arbor — not to mention the hundreds of smaller cities and town across the state that lack the same dynamic restaurant scene.
ROC’s ultimate goal in Michigan is ideological, not economic. A ROC employer-member recently admitted that the policy change it has proposed in Michigan (and elsewhere) is the first step in getting to “no tips.” That might be a desired consequence for ROC and its foundation donors, but servers don’t want what ROC is selling. A survey from industry publication Upserve found that 97 percent of tipped workers preferred earning tips and a base wage to a flat hourly wage.
Michigan restaurants can’t afford ROC’s anti-tipping proposal, and the state’s tipped employees don’t want it. If one of ROC’s organizers approaches you about signing to support this ballot initiative, you might give them a tip of your own: This bad idea has no place in Michigan.
Michael Saltsman is managing director of the Employment Policies Institute.