Last week, Wisconsin Sen. Chris Larson and Rep. Francesca Hong announced they would reintroduce a 2021 proposal to eliminate Wisconsin’s tip credit. This proposal would raise the tipped minimum wage more than 200 percent. But based on both Larson and Hong’s support for as high as a $15 minimum wage, this could have disastrous consequences for Wisconsin.
Analysis of tip credit elimination by economists Dr. William Even (Miami University) and Dr. David Macpherson (Trinity University) spell out the consequences for a potential $15 minimum wage in Wisconsin paired with no tip credit:
- 9,282 tipped jobs lost;
- $58.6 million in lost earnings statewide; and
- As much as $3,095 in earnings lost annually for Wisconsin’s poorest households.
Economists agree tipped minimum wage hikes of any magnitude can hurt tipped employment and employees’ earning potential.
- Every $1 increase in the tipped minimum wage causes 6.1% job loss for tipped restaurant employees;
- Every $1 increase in the tipped minimum wage causes 5.6% earnings loss for employees;
- As tipped minimum wages are increased, tipping percentages decline in full-service restaurants.
- Jurisdictions that have already eliminated the tip credit, such as California and Washington, have some of the lowest tipping percentages in the country.
- Every $1 increase in the tipped minimum wage increases the likelihood of restaurant closure by 14%.
Employees across the country have led the fight to protect the tip credit and save their tips. Areas including Maine, New York, Maryland, New Mexico, Virginia, and Portland, ME have successfully saved the tip credit system due to employee pushback. That’s because employees often make far more than the regular minimum wage rate through their tips.