Wage growth in the hotel industry reignites the battle for the minimum wage

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The lingering effects of the pandemic continue to drive up wages in the restaurant industry, injecting new energy into state and local efforts to abolish the lower minimum wage.

Pandemic-related health risks, the unpredictability of schedules and the harassment that workers facing the public have faced during the pandemic have made the industry less attractive, which is why catering employers still have to struggling to find workers even as wages continue to rise, economists and labor advocates say.

Federal law allows companies to pay employees as little as $2.13 an hour if they earn more than $30 a month in tips. But the share of hourly restaurant workers earning less than $7 an hour, just below the federal minimum wage of $7.25, has declined rapidly since 2016, and even more so in 2022. Only 2% of hourly workers catering earn less than $7 a year. hour so far in 2022, according to data collected by job search site Glassdoor.

“We continue to see wage growth well above what we saw before the pandemic, especially in frontline industries, such as leisure and hospitality and transportation and warehousing,” said Daniel Zhao. , Senior Economist at Glassdoor. “If you’re offering $2 plus tip right now, you’re going to have a hard time finding workers.”

The labor market squeeze rekindles efforts by advocates who say scrapping the lower-tipped minimum wage will economically boost workers of color and allow the restaurant industry to attract enough staff to fully recover from the pandemic. . But some workers, economists and industry groups believe it would have the opposite effect, driving up food prices or leading to reduced hours, job losses and even restaurant closures.

“We have done so much work to expose that underpayment is a direct legacy of slavery and a source of incredible amounts of poverty and the highest rates of sexual harassment of any industry in the United States for a hand -predominantly female workforce and disproportionate women of color,” said Saru Jayaraman, president of One Fair Wage, which advocates for the abolition of the lower minimum wage.

“We need a policy that will signal millions of workers to come back, it’s worth working in restaurants,” she said.

“Dig our graves”

Groups opposed to changes to the tipped federal minimum wage say removing the lower rate ultimately results in lower take-home pay for workers who earn tips. Michael Lynn, a professor at the Cornell University School of Hotel Administration, for example, found a correlation between tipped workers with higher wages and lower tipping percentages.

“Before Covid, this policy was a slap in the face. Now he’s literally digging our graves,” said Joshua Chaisson, a server from Maine who supports raising the regular minimum wage but not the tipped minimum wage.

“It’s not that easy to just say, you know, take a price increase like you might have done before because prices are already going up,” said Michael Saltsman, chief executive of the Employment Policies Institute, a conservative think tank. When the base rate that employers have to pay is tripled, “that restaurant almost immediately becomes unprofitable unless it finds a way to offset that with higher prices,” he said.

But William Spriggs, an economics professor at Howard University and the AFL-CIO’s chief economist, says those fears are nothing more than industry myths.

“In other countries, that’s not how it works. Many American tourists are quite shocked when they travel to Europe and notice that no one even tips. Servers don’t expect a tip,” Spriggs said.

Supplement model

Some American restaurants have already made the decision to pay more to their staff who earn tips and to make tipping optional.

Adam Orman, owner of Austin, Texas-based restaurant L’Oca d’Oro, told Bloomberg Law that his starting wage for frontline and sideline workers was $15 an hour, with tips split at equal shares among the employees working that shift.

Once he made sure everyone was earning at least the federal minimum wage, Orman said he started thinking about ways “to bridge the gap between the kitchen and the servers.” Including a 20% service charge on customer bills did the trick.

“By guaranteeing the service charge, where there would normally be tips, we’re not really spending more than we would if we just brought the tips and let the server go with them,” Orman said. “We’re just the ones controlling the tip and controlling where that 20% goes.”

But some servers like Chaisson say the surcharge model creates concerns about tip theft because it’s up to the restaurant to pay the service charge.

“It’s really important to note that the service fee belongs to the house,” he said. “They are not the property of the workers. As a result, the business owner can truly distribute these funds as they see fit.

local movement

The last time Congress raised the minimum wage was in April 1991. But the political deadlock in the Senate makes it unlikely that the federal government will make any changes any time soon. Instead, those pushing to abolish tipping wages are seeing success at the national and local levels.

Seven states already require employers to tip workers the state minimum wage, with similar legislation currently being passed by the New York and Massachusetts legislatures. A Michigan state court recently declared unconstitutional the state legislature’s 2018 decision to strike down the minimum wage award to tipped workers, though an appeal is pending.

One Fair Wage announced earlier this year that it would invest $25 million in a campaign to get 25 states to abolish less-than-tip pay within the next four years.

The group this week submitted 610,000 signatures to put a measure on Michigan’s 2024 ballot to raise the state’s minimum to $15 and end all lower wage rates for tipped workers, workers with disabilities and young people.

Ballot initiatives in the District of Columbia and Portland, Maine, this year will allow voters to decide whether tipped workers in those cities should earn the full minimum wage.

federal deadlock

Multiple attempts to abolish the tipped minimum wage at the federal level have failed.

The Fair Labor Standards Act created a federal minimum wage in 1938, also establishing a federal sub-wage to distinguish between “regular workers” and disabled or service-based workers. Amendments to the FLSA in 1966 extended federal protections to previously excluded service industries, but maintained the sub-minimum wage for tipped workers as long as they ultimately earned the state minimum wage in tips.

The House Education and Labor Committee Chairman Salary Increase Act Bobby Scott (D-Va.) and Chairman of the Senate Budget Committee Bernie Sanders (I-Vt.) would have eliminated the underpayment when it passed the House in 2019, but Democrats couldn’t get their own party’s full backing to back the measure in the Senate.

Sanders also added a similar provision to President Joe Biden’s U.S. bailout last year, but the Senate congressman removed the provision for violating the rules of the budget reconciliation process.

“We haven’t raised the minimum wage in this country in decades,” Sanders told Bloomberg Law on July 25. “I’m sure there are waiters and waitresses who are doing very well. I’m sure there are waiters and waitresses who are doing terribly. We need to raise this tipping minimum wage .

representing Jahana Hayes (D-Conn.) July 19 introduced the latest legislation requiring employers to pay servers the full minimum wage plus tips. So far, there has been no activity on the bill.

-With the help of Paige Smith.

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