New York’s minimum wage is set to rise to $9 an hour by the end of next year. For the state’s insatiable labor unions, that’s not the end of the story, but just the beginning.
In Albany this month, a coalition of Big Labor-funded groups rallied in support of a scheme to hike the minimum wage for tipped employees (e.g., waiters or bartenders) by as much as 80 percent.
They’re betting that a state wage board, soon to be convened by Gov. Cuomo, will do their bidding without a messy legislative fight.
But the “beneficiaries” of this scheme don’t like it.
Tipped employees in New York are subject to the same minimum wage as all other employees.
Yes, advocacy outfits like the National Employment Law Project and the Restaurant Opportunities Center dishonestly talk of a “subminimum wage,” but state law is clear:
Tipped employees must earn at least the full minimum in wages and tip income. When tips and wages don’t add up to the minimum, the employer must make up the difference.
In practice, this system works out well for the employee: In reported earnings alone, Census Bureau data show that servers and bartenders average $13 an hour nationwide, with top earners collecting $25 an hour or more.
Where do labor groups get their “subminimum wage” charge, then? As it turns out, they refuse to count tips as income earned on the job — no matter that both the IRS and the state Taxation and Finance Department say otherwise.
This curious definition of employee earnings has also led to some outlandish accusations.
For instance, ROC faulted restaurants for “passing the obligation of paying wages onto [the] customer” — ignoring the fact that customers pay the employees’ wages at any for-profit business.
(If tipping’s eliminated, customers will still pay for wages through higher prices.)
Bad as these arguments are, though, the activists’ “cure” is worse.
Full-service restaurants have notoriously narrow profit margins, netting just three cents on average from each sales dollar after expenses. And other than food, labor is the biggest expense they face.
Restaurants’ price-sensitive customer base can always opt to stay home instead of eating out; it won’t be keen on footing a bill that’s 25 percent to 30 percent higher in order to pay for someone else’s good intentions.
Where raising prices isn’t an option, reducing staffing levels is.
In Washington, with the highest state minimum wage in the country, Seattle Weekly reported in 2011 that many restaurants had stopped hiring bus boys and started keeping fewer servers on the floor per shift.
Economists from Miami and Trinity universities studied these trends nationwide and found a direct relationship between increases in the tipped minimum wage and cutbacks in restaurant employment.
Technology makes these changes even easier: Casual chains such as Chili’s and Chevys Fresh Mex have introduced tabletop ordering tablets that dramatically reduce the need for service staff.
Restaurants have other options that are equally unfavorable for servers, including an embrace of the European model, which eliminates tipping in favor of a set service charge on the bill.
The Employment Policies Institute surveyed 5,000 people nationwide who reported earning tips and working in a restaurant, including 300 people in New York.
It found that nearly 70 percent rejected even a $15 base wage that upset the tipping status quo.
The biggest winner from a tipped wage hike is organized labor, which hates any compensation system that’s based mostly on tip income because it makes it harder for a union to extract dues.
But the question at hand in New York isn’t about what’s best for Big Labor — it’s about what’s best for employees, employers and the customers they serve.
Michael Saltsman is research director at the Employment Policies Institute, which gets support from restaurants, foundations and individuals.