As New York has diminished its tip credit and raised regular and tipped minimum wages over the last several years, the state’s full-service restaurant industry, which employs the majority of tipped workers, has experienced declines in both annual employment and annual establishment growth.
New York has the smallest tip credit and highest tipped minimum wage among its closest neighbors, and consequently has seen a higher rate of decline in restaurant employment and establishment growth.
|State||Tipped Minimum Wage||Regular Minimum Wage||Tip Credit (% of Regular)|
As it diminished the size of its tip credit compared to other neighboring states, since 2012 New York has gone from having the highest full-service restaurant growth among its neighbors (4.6% annual growth in 2012) to the lowest, actually showing lost full-service restaurant jobs in 2018 and 2019. These effects were also prior to the job loss impacts caused by the pandemic beginning in 2020. New York was the only state among its neighbors (all with more robust tip credits and lower tipped minimum wages) to experience negative restaurant employment growth in 2018, and losses in 2019 were at least triple those experienced by other states.
Additionally, the state has the largest outstanding gap among its neighbors in restaurant employment missing from pre-pandemic levels. New York is still missing 27 percent of 2019 full-service jobs after the pandemic (as of latest data in 2021). Neighboring Connecticut is only missing 15 percent of 2019-level restaurant jobs, New Jersey is only missing 17 percent of 2019 jobs, and Pennsylvania is missing 21 percent of 2019 jobs.
New York has also had drastic swings in the annual growth of full-service restaurant locations prior to the pandemic. Aside from an outlier in 2017, New York saw significant declines in the number of full-service restaurants in three out of four years from 2016 to 2019. Five out of six neighboring states with more robust tip credits all maintained positive restaurant growth during this period.
As New York lawmakers consider legislation to remove the state’s tip credit entirely, the state’s current experience with slashing the tip credit has already compromised its restaurant industry compared to regional neighbors.