This week, Washington, D.C. implemented its first of several tipped minimum wage hikes that will eliminate the city’s tip credit entirely by 2027. The May 1 increase raised the tipped minimum wage from $5.35 per hour to $6 per hour, but will increase again on July 1 to $8 per hour.
In anticipation of this new law, the Employment Policies Institute surveyed over 100 restaurant operators in the city – most of them owning three or fewer locations. The results of the survey quantified the fears of many about the implementation of Initiative 82, the ballot measure passed last November to eliminate the city’s tip credit.
The survey’s key findings include:
- A strong majority of operators (86%) think the tipped minimum wage increase to $8 by July 2023 will have a negative impact on their operation(s).
- As a result of the increases in 2023 and through 2027, a majority of restaurants say they will be forced to raise menu prices (79% by 2023; 80% by 2027), reduce staff or consolidate positions (63% by 2023; 72% by 2027) and reduce employee hours (62% by 2023; 70% by 2027).
- Some restaurants indicated they will take additional measures to offset tipped minimum wage increases by 2027, including:
- Seventy percent said they will introduce automatic service charges to customers’ bills,
- Forty-six percent said they would introduce other automatic fees for customers (i.e. “Fair Wage” fee),
- Forty-six percent said they would open any future locations in surrounding jurisdictions, such as Maryland or Virginia,
- Thirty-eight percent said they would substitute automation or self-service technology for employee tasks,
- Twenty-five percent said they would change their restaurants’ service model to include more quick service or counter service,
- Twenty-two percent said they would adopt a no-tipping required policy, and
- Thirty-one percent said they would have to close one or more locations.
- Eighty-five percent of restaurant operators believe increases to the tipped minimum wage will force them to decrease the number of tipped workers in their restaurants by 2027.
- Ninety-two percent say prices will increase in response to the tipped minimum wage increase to $8 per hour by July 2023, with 43% saying prices will “significantly increase.” However, 98 percent of operators believe that raising menu prices will adversely affect customer foot traffic. Three-fourths (74%) think it will limit or reduce raises for kitchen and other non-tipped staff (somewhat likely, 19%; very likely, 55%).
Read the full findings of the survey here.