The Democratic congresswoman said that people cannot live off tips. People who live off tips beg to differ.
Days after the House passed a bill to raise the federal minimum wage to $15 an hour, Rep. Rashida Tlaib (D–Mich.)—a member of the much-embattled "Squad" targeted by Pres. Trump—upped the ante: "Now I think it should be $20," she said.
Tlaib was addressing an event spearheaded by the Restaurant Opportunities Center of Michigan and One Fair Wage, two organizations pushing for a higher minimum base pay for restaurant industry workers. While a $20 minimum wage would be problematic for a range of businesses, the restaurant industry, in particular, stands to lose the most from such proposals.
Employees at food and drink establishments typically work on a "tipped wage," an hourly base rate that is lower than the minimum wage. Those workers can make up the rest of the hourly minimum wage in tips; if gratuities fail to bring an employee's earnings to the equivalent of the minimum wage, employers are required to make up the difference. If employees make more than the hourly minimum wage in tips, they get to keep the extra income.
Not only does this model of pay give waitstaff the chance to accrue earnings above and beyond the minimum wage, but it also allows restaurants of every variety to stay above water. In an industry with profit margins around 6 percent, employees who make a lot of tips also help keep the doors open and the stoves running.
The federal tipped minimum is currently $2.13 an hour. Tlaib's proposal, which amounts to an increase of almost 940 percent, would spell trouble for many dining establishments, particularly those of the mom and pop variety, many of which would require a miracle to comply with Tlaib's proposal and stay in business. A recent study released by two researchers from Harvard University's Business School concluded that a median-rated restaurant on Yelp (3.5 stars) was 14 percent more likely to close with each additional dollar added to the tipped wage.
Some will obviously be fortunate enough to remain open—but many of their employees may not be so fortunate. Take Manhattan, for instance, which recently hiked the city's tipped wage to $10 an hour. A corresponding survey released by the NYC Hospitality Alliance found that, in response to that increase, 75 percent of full-service establishments will cut employee hours in 2019, and 47 percent will eliminate jobs entirely.
And those jobs will likely belong to the most vulnerable economic group: those with the lowest skills, who, on paper, are supposed to benefit from minimum wage increases. A 2015 study from the University of Washington shows that restaurants subjected to tipped wage hikes do away with the more menial positions in favor of high-skilled labor.
"A server can bus their own table, but you can't ask a busboy to open a bottle of wine and talk about what it can be paired with," Susannah Koteen, who runs Lido Restaurant in Harlem, told CBS News in January.