Minimum Wage

Why These Workers Want a Lower Minimum Wage

Eliminating the tipped wage in Washington, D.C., has led to higher prices and fewer restaurant jobs.

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When labor activists came to D.C. demanding higher wages for restaurant workers, they clashed with an unexpected adversary: restaurant workers.

A few decades ago, waiting tables or bartending in the nation's capital could be quite lucrative. "The money was amazing. At the end of a good bar shift, what some people had to spend an entire week scraping in an office nine to five, I could make that in a night," says Damon Dixon, a restaurant worker of 30 years.

In 2016, a national movement started pushing to raise the minimum wage to $15 an hour. But D.C.'s tipped workers, including servers and bartenders, weren't affected, thanks to a carve-out that let restaurants pay employees a fraction of the minimum wage as long as their tips covered the difference. Known as the "tip credit," this policy is common across the U.S.

Labor activists aimed to eliminate the tip credit, arguing that workers should receive the full minimum wage on top of any tips they earned. Saru Jayaraman, founder and president of One Fair Wage, has led the movement.

When D.C. voters passed a referendum to eliminate the tip credit in 2018, the city council overturned it at the urging of restaurant workers. "The tipping system works well for everybody. It works well for guests, for them to show their direct appreciation," says Joshua Chaisson, a bartender who runs the advocacy group Restaurant Workers of America. "Most importantly, [it] allows us to maximize our income."

According to the Bureau of Labor Statistics, in 2022 D.C. waiters and waitresses were making on average $50,790 a year, including tips—the highest wage for restaurant workers in the country. Asked about this figure at a local press conference, Jayaraman told Reason that the data were wrong. "We have a research department. We look at the Bureau of Labor Statistics. We look at Square, which tells you how much people earn in tips. That's so not true. I'm happy to send you the data," she said. Her team didn't respond to any follow-up requests.

One Fair Wage got the measure back on D.C.'s ballot in 2022, and it passed by a wide margin. "Seventy-five percent of them voted for it because it was a free toaster," says Geoff Tracy, the owner of two D.C. restaurants. "I would say that 98 percent of voters don't understand the compensation structure for full-service restaurants."

The elimination of the tip credit is happening gradually, but restaurants are already feeling the pressure. Tony Tomelden—owner of The Pug, a beloved dive bar—says he's feeling the strain. "It is daunting trying to figure out how to make all these ends meet," he says. "For the first time in 17 years, I raised prices." He is currently required to pay $10 an hour, double what it was two years ago. By 2027, that will likely climb to around $18 an hour before tips.

Meanwhile, Tracy estimates the wage hike will add $400,000 to his payroll per location each year. "That's like doubling my rent," he says, adding that these costs will inevitably get passed on to customers.

"We're watching a beloved bar back, a beloved busser, a dishwasher have their jobs taken away," says restaurant worker Valerie Graham. "Not because our owner-operator is an evil billionaire but because they're an independent business owner who had to make some business decisions and there's a callousness with which our industry is talked about."

Jayaraman claims that restaurant closures and job cuts in D.C. aren't caused by the elimination of the tip credit. "Since the initiative, more restaurants have opened, more workers hired," she explains, referencing a report that One Fair Wage published last year, titled "The Sky Is Not Falling; the Floor Is Rising."

While restaurant employment did initially rise after the measure passed, jobs have decreased by 4.3 percent since their December peak, according to Federal Reserve data.

Jayaraman challenged those numbers too. "If you look at government data that the D.C. Attorney General has approved, we have 10 percent more restaurants in the District of Columbia, seven percent more restaurant jobs, and 6.8 percent higher wages. And that data was confirmed by The New York Times in April of this year," she told Reason.

The New York Times article that she cited (actually published in March) in fact contained inaccuracies about the number of restaurant employees in the District. When Reason asked the Times about the errors, the paper ran a correction.

As D.C. restaurant jobs decline, some establishments are introducing "service charges" to help cover wage expenses. Yet servers are often taking home less, and some believe the policy caps their earning potential.

Voters, Dixon argues, are "on a savior complex trying to save people that didn't need saving in the first place. The tips is the main reason why we got into this industry."

Despite dictating how restaurants are supposed to work, Jayaraman has yet to operate a successful restaurant. In 2006, a group she cofounded—the Restaurant Opportunities Center—launched a New York City establishment called Colors that tried to pay its wages along the lines Jayaraman has been demanding. It quickly faced financial trouble, cut salaries, faced lawsuits, and ultimately closed. The group's two other restaurant ventures also failed.

One Fair Wage aims to end the tip credit in at least 25 states by 2026. Those jurisdictions would do well to take note of what is happening in D.C. Formerly thriving businesses are now grappling with closures, vacant storefronts, staff shortages, and escalating prices.

"Put the pieces together in the puzzle," says Graham, "and we can see that this is not working."

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