One Fair Wage, the union-funded activist group responsible for a $25 million campaign to end tip credits nationwide, has long touted a minimum wage with “tips on top” platform. It sounds appealing, but is not based in reality.
Initiative 82 on the ballot in November would eliminate the city’s existing tip credit, nearly tripling the city’s minimum wage requirement for tipped restaurant employees to at least $16.10 hourly, with increases based on inflation every July. The campaign, bolstered by One Fair Wage, insists the measure will create a “fair wage plus tips,” with activists flooding Twitter using the #TipsOnTop hashtag in support of the measure.
The opposition campaign, featuring actual experiences of DC restaurant and bar employees, argues Initiative 82 will make tipped employees worse off due to reduction of their tip income. They report DC’s tipped workers currently earn an average of $26 per hour when tips are factored in, and changing this system is a bad solution in search of a problem.
Some restaurants that have tried to switch to a regular minimum wage model for service staff have caused them to adjust tipping policies, either implementing a no-tipping-required standard or a flat service charge collected by the restaurant. When tip credits are eliminated, the rising wage bill may require restaurateurs to adjust their business models. Passing off costs via menu price increases risks driving away essential foot traffic from customers who can’t afford the increases.
To ameliorate this, restaurants may raise prices but institute a no-tipping policy to keep bill costs affordable for their customers. Similarly, flat service charges added to customers’ bills may be collected by the restaurant, but may not go directly to the service staff.
- Danny Meyer, a former One Fair Wage partner, ended up reversing his regular minimum wage with no tipping policy in his New York City restaurants after losing 40% of long-time staff over lost tip earnings. One of his employees reported she lost roughly $10,000 in annual earnings when Meyer switched to a flat hourly wage system.
- Tom Colicchio, another One Fair Wage advocate, also reversed his restaurants’ flat hourly wage policy for previously tipped employees, reflecting later that “servers would have to make $55 per hour” to make up for tips lost under the new policy.
- New York’s Eleven Madison Park announced it would return to a tipping model instead of a previous service charge collected by the restaurant, claiming tips would result in “more competitive wages” for its service staff.
- David Chang has also reversed flat-wage, no tipping policies in several of his restaurants, with one chief executive arguing the experiment “never really worked.” An explanation on Momofuku Ko’s website argues the switch back to tipping allows the restaurant to keep prices the same while providing better compensation and benefits for employees,
- San Francisco restaurant owner Thad Vogler ended tipping in his restaurants in favor of paying a flat minimum wage, servers reported their earnings decreased from as much as $45 per hour when tips were factored in, to as low as $20 per hour when the no tipping policy was implemented.
- At San Francisco-based Zuni Cafe, tipped employees leaked their concerns about losing income to the media when the restaurant announced they would move to a service fee model.
For these and other reasons, eliminating tip credits upends the current tipping system creating sustainable income for many restaurant employees, and may even reduce overall income. In fact, a review of state wage mandates across the country found that raising tipped wages led to lower tip percentages for tipped restaurant employees. All things considered, the One Fair Wage promise of “tips on top” has not materialized in practice.
Initiative 82 organizer Adam Eidinger shrugged off the consequences of this massive tipped wage hike, saying restaurants need only raise their prices by 25 cents to account for the increase. Yet restaurants who have tried in the past have also pushed back on this premise: Meyer told the Washington Post that to account for labor cost increases due to his flat wage, no-tipping experiment, he would have had to nearly double his menu prices.
Tipped restaurant workers led the charge to repeal a 2018 ballot measure eliminating the District’s tip credit. Initiative 82 is just a resurrected bad idea under the same old empty promises.