Minimum Wage

Rep. Rashida Tlaib Wants a $20 Minimum Wage for Tipped Workers. That Would Likely Destroy the Restaurant Industry.

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, some 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.

The battle over tipped wages isn't new, with similar fights having been waged in Seattle, Washington, and Maine, among other cities and states across the country. Washington, D.C., entered the fray last summer when activists—spearheaded by the Restaurant Opportunities Center and One Fair Wage—passed Initiative 77, which, had it been implemented, would have eliminated the tipped wage entirely in the District. (The initiative passed at the ballot box, but was overturned by the D.C. Council after an outcry from service industry professionals who objected to the law.)

"There seems to be this myth going around that most tipped employees in restaurants aren't earning a livable wage; after 13 years in the industry, this baffles me completely," wrote Ryan Aston, a local bartender, in a Washington Post op-ed. "I earn roughly $45 an hour with tips included; I don't know a single server or bartender in the District whose wages have to be supplemented because they haven't earned the minimum."

Regardless, Tlaib wants a one-size-fits-all approach, one that mandates a sky-high federal wage and fails to account for specific industry needs.

"People cannot live on those kind of wages, and I can't allow people to be living off tips, you know, relying on tips for wages. It's just not enough to support our families," Tlaib said at the event, dubbed "Server for an Hour." But if a proposal like Tlaib's were to pass, the workers she's advocating for may be out of work entirely.