In Washington, D.C.’s election on Tuesday, voters approved Initiative 82 to eliminate the city tip credit and raise the minimum wage for tipped restaurant workers by more than 200%.
While the measure itself got significant support at the ballot, D.C. restaurants are warning about the inevitable consequences, and residents are already expressing confusion over the implications of the new policy.
Since the outcome on Tuesday, restaurant employers have reacted to the new changes:
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Noe Landini, owner of Junction Bistro Bar and Bakery on Capitol Hill, noted the drastic increases will cause a “domino effect” of higher costs for customers as restaurant owners struggle with drastically higher wage bills amid narrow profit margins.
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Geoff Tracy, owner of Chef Geoff’s restaurants, described his tipped employees currently earn up to $40 per hour through tips, and eliminating the tip credit system would force restaurants to impose restaurant-managed service charges and drive tipping down.
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Jamie Leeds, owner and chef at Hank’s Oyster Bar, declared “I will not open another restaurant in D.C.” He also noted that to make up revenue he may switch to automated, quick-service models in existing restaurants due to the rising wage bill for tipped restaurant staff.
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Mark Bucher, co-owner of Medium Rare, said it will be impossible to raise prices to account for the wage hike, and service charges also subject to the city’s sales tax will drive away foot traffic for restaurants – which could lead to fewer tips for restaurant service staff.
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Ashok Bajaj, owner of Rasika and several other DC restaurants, noted the change could cost him as much as $300,000 more per year to maintain his current staffing levels. He added: “Do you really think the restaurant makes that much money to absorb that? Not mine.”
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Nizam Ali, co-owner of historic Ben’s Chili Bowl and full-service restaurant Ben’s Next Door, expressed fears that raising prices to cover the drastic increases would send customers to neighboring Maryland and Virginia – leaving D.C. restaurants in a difficult position to adapt.
But these owner reactions aren’t out of the blue, as many D.C.-area residents took to Reddit after the election to hash out their confusions over DC’s new law. Various users posted comments echoing “Would this mean ending tipping?” now that voters approved Initiative 82. Commenters in D.C. responded with a barrage of comments and questions making it clear that the measure has already begun to sow confusion over the implementation and consequences tip credit elimination will cause.
Comments on how much to tip going forward ranged from concerns about the new cost of dining out in the District, speculation over new service charges, and confusion about how much to tip when workers make the flat minimum wage. Commenters also noted Initiative 82 may be a “win” for higher hourly cash wages, but will come at great costs to the restaurant industry, including employees.
The reactions from District restaurant owners and residents concur with recent economic research finding tipped wage hikes cause significant employment and income loss for tipped restaurant workers, and correlate with lower customer tip percentages at full-service restaurants. Another recent study by economists from Miami and Trinity Universities found that raising the District’s tip credit to $15 per hour would cost families of tipped workers more than $1,500 in annual income on average.