New York Should Save What’s Left of Its Tip Credit

In recent years, New York’s decision to slash its tip credit and increase its tipped minimum wage requirement has wreaked havoc on the restaurant industry.

Data already shows that even before the onset of the pandemic, downsizing the tip credit has killed New York full-service restaurant jobs and stunted establishment growth. Since 2019, New York went from having the highest full-service restaurant job growth among its neighbors, to having the lowest tip credit allowance and experiencing net job losses in 2018 and 2019.

Yet even proposals to increase the minimum wage for tipped employees have stopped short of complete tip credit elimination. On top of the research showing harmful consequences of drastic tipped wage hikes for employees, customers, and restaurant survival – New York’s tipped employees themselves rallied to save the tip credit statewide.

Now labor activists are threatening to bring a full tip credit elimination proposal back to the Empire State.

In a recent report, anti-tip credit advocates at One Fair Wage released a report arguing tip credit elimination would help New York boost its recovery from pandemic losses, and be more like California.

But as is the case often with One Fair Wage’s numbers, the data just isn’t adding up.

A review of full-service employment data in both California and New York reveals that the Empire State, which has maintained its tip credit, has bounced back faster than its no-tip credit Golden State counterpart.

Latest-available Bureau of Labor Statistics data shows from the lowest point in April 2020, New York’s full-service restaurant jobs have boomed back by 326%, compared to just 186% job growth in California.

Source: Bureau of Labor Statistics Quarterly Census of Employment and Wages quarterly data files, full-service restaurants (NAICS 722511), 2019-2023.

One Fair Wage notes in its report that New York is still down a slightly greater percentage of pre-pandemic restaurant jobs than California. They argue that if the Empire State were to eliminate its tip credit, this would not be the case.

Yet the data shows New York suffered a larger full-service restaurant employment loss at the beginning of the pandemic as a percent of pre-pandemic employment in February 2020 – making the state’s two-fold job recovery over California even more impressive. In fact, New York’s tip credit may be a contributing factor to its meteoric rate of recovery.

Feb-20 Apr-20 % Change from Feb 2020 to April 2020
CA statewide 646,629 213,242 -67.0%
NY statewide 321,217 69,908 -78.2%

A previous analysis shows New York’s neighboring states with more robust tip credits all have had a higher rate of restaurant job recovery post-pandemic than the Empire State.

Decades of economic evidence show eliminating tip credits harms employment, earnings, and even causes businesses to shut down entirely. Now this new data suggests a potential new phenomenon: saving the tip credit could put states and cities in a better position to weather economic downturns.

While there are many factors that have contributed to states and cities recovering from the devastating effects of the pandemic, New York should continue to listen to tipped employees and save what’s left of its tip credit, not take a page out of California’s anti-tip credit playbook.