One Fair Wage, the union-funded group pushing states and cities around the country to eliminate their tip credits, often touts to lawmakers and media that switching to a flat minimum wage won’t cost anything. With sights set on Ohio as its next target, One Fair Wage has brought the fight to Cleveland.
Yet their affiliated grant-making program says they know the financial reality of their policy demands.
One Fair Wage has developed the “High Road Kitchens” program to give grants out to restaurants who agree to eliminate the tip credit. One Fair Wage launches a grant program in a jurisdiction before launching their official campaign to eliminate the tip credit state- or city-wide. (See Chicago, IL, Prince George’s County, MD, or New York City, NY.)
The very existence of the grant program speaks volumes: tip credit elimination is financially unsustainable and places severe burdens on restaurant employers and their tipped employees. More to the point, this one-time grant won’t even cover the cost an increase for one employee.
Let’s look at the math. In the latest High Road Kitchens launch in Cleveland, One Fair Wage promised $5,000 checks to restaurants who “Commit to transition to a $15 minimum wage for all employees.”
Yet the grant amounts promised by High Road Kitchens demonstrate yet another fundamental lack of understanding of how restaurant finances work. The one-time donation of $5,000 would only cover the added cost of paying $15 per hour wages (increased from the current $5.05 tipped wage in Ohio) to one full-time employee for three months. Check out the math:
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1 full-time employee = 40 hours per week = 160 hours per month * $9.95per hour wage difference = $1,592 wages paid per month
Put another way, One Fair Wage’s $5,000 would only cover two part-time employees who work 20 hours per week for the same three month period.
For a restaurant that would be required to pay all staff (front and back of the house employees) a $15 minimum wage under this program, a single $5,000 cash injection will barely scratch the surface of the financial costs of truly implementing this policy.
It’s no surprise that restaurants confronted with this policy change have to take drastic steps that are bad for workers.
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Tip credit elimination forces employers to reduce staff, change tipping models, and in some cases, close down altogether.
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Tip credit elimination has also given rise to more automatic service charges instead of traditional tipping, which servers say reduces their take-home pay.
One Fair Wage’s small-dollar donations won’t recover staff’s lost earning potential or lost jobs when restaurants downsize or shut down.
Restaurants should beware of One Fair Wage’s feel-good promises with burdensome strings attached.