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June 19 2018

D.C. Will Kill Tips with New Minimum Wage

by Patrice Lee Onwuka

Washington, D.C. residents are set to vote today on a $15 minimum wage for tipped workers, but it's those workers who will lose out when diners skip out on tipping and restaurants cut their hours or jobs to save costs.

Initiative 77, a union-backed effort, would abolish the current tipped wage of $3.33 an hour in the nation's capital and eventually set a $15 an hour minimum wage for all workers by 2025

Many bartenders and waitresses say they don't need. They can earn them three to four times the District'minimum wage each night just by offering good service. 

They are leading voices in opposition to this initiative along with the business community. A bartender writes for the Washington Post:

There seems to be this myth going around that most tipped employees in restaurants aren't earning a livable wage; after 13 years in the industry, this baffles me completely. I earn roughly $45 an hour with tips included; I don't know a single server or bartender in the District whose wages have to be supplemented because they haven't earned the minimum.

Even progressive leaders in the city including the mayor and a majority of the city council oppose it.

The Washington Post editorial team is against Initiative as well because it's bad for workers and dinners:

To sum up economics in one phrase, there is no free lunch. Benefits to a particular individual or group must be paid for, usually by imposing costs on someone else. 

No one can say for sure how restaurants will offset a roughly fourfold increase in labor costs, but there are only so many ways to do it: reducing hours, reducing jobs, cutting portions, substituting cheaper ingredients and, almost certainly, raising menu prices...

The big losers may be lower-income consumers, for whom dining out is a special treat they might no longer afford if menu prices go up.

Despite what opponents claim, it will be nearly impossible for restaurants to absorb such a jump in labor costs and not change their business practice. It's not just the salaries that rise, but other pay-related costs such as payroll taxes and insurance premiums. In addition, employers have to figure out how to deal with other staff salaries.

What’s likely to happen if this initiative passes:

  • Restaurants will raise menu prices.

  • Restaurants may cut hours of the waitstaff.

  • Diners will cut the size of their tips or leave no tips at all.

  • Restaurants may experiment with smaller portions or lesser quality ingredients.

  • Fewer diners will eat at sit-down restaurants.

Here's the bitter pill one group of area restaurants predicts they will have to swallow if Initiative 77 passes:

“We ran the numbers, and it would impact the bottom line so drastically that we would have to change our whole business model,” said Jamie Leeds, owner and founder of the JL Restaurant Group, which includes Hank’s Oyster Bars in the District.

She expects to raise prices up to 40 percent if the initiative passes, which would mean Hank’s signature lobster roll would cost $35 instead of $25. Part of the price bump would go to her cooks, Leeds said, to maintain a kitchen hierarchy. If a dishwasher is now hired at $15 an hour, you can’t pay the same amount to a senior line cook, she said.

The quality of service could suffer if good workers quit to find jobs across the Potomac River or Beltway in Virginia and Maryland.

Don't believe me? When restauranteur Danny Meyer eliminated tipping at his restaurants to give them a minimum wage, his back-of-house employees earned 20 percent more, but 30-40 percent of his legacy waitstaff quit. These are workers who had been with the company for five to eight years.

Eliminating tips may seem like a way to help some workers by guaranteeing their wages, but the harm to many will outweigh the benefits to a few.

 

Despite what opponents claim, it will be nearly impossible for restaurants to absorb such a jump in labor costs and not do anything. It's not just the salaries that rise, but other pay-related costs such as payroll taxes and insurance premiums. In addition, employers have to figure out how to deal with other staff salaries.

Independent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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