Tag Archives: service industry workers

DC Dilemma: Fair Votes and Fair Pay versus Tip Subsidies for Owners

New Orleans  New Orleans is a service worker, hospitality industry city, as are an increasing number of other areas in the United States.  Tips are always an issue when so much of the workers’ income depends on them, especially when employers pay the federal minimum wage for tipped workers of $2.13 per hour versus the federal minimum for other workers of $7.25 per hour, which has been frozen for what seems like most of this century.  In some states and cities, like San Francisco, Seattle, and, most recently, Flagstaff, Arizona, voters and public officials have taken steps to try to deal with this issue.

Washington, DC put this issue on the ballot as well.  The voters passed the measure overwhelmingly to stairstep up the level for tipped workers to the full minimum wage in the city which is on its way to $15/hour.  In a democracy most of us, for or against, would have thought that settled the matter, the voters have spoken.  In Washington though somehow the National Restaurant Association, always on record against the measure before and after the vote, has joined with some of the restaurants in the capitol city and convinced the DC city council to review the measure and potentially overturn the vote of the people.

How could this be possible?  All of us know Washington has become crazytown, but we thought that was just on the federal level.  We didn’t realize that the new autocracy had leeched down to the city level as well.

On Wade’s World, I talked to David Cooper, a Senior Economic Analyst for the well-regarded Economic Policy Institute (EPI) and the deputy director of EARN, the Economic Analysis Research Network, about a study he authored in the middle of this mess to remind the city council that in fact the evidence thus far is that workers do better financially in “one wage” cities than in tipped cities.  In DC, the numbers also matter because the data Cooper has marshaled also remind anyone interested that in a majority African-American city, blacks do worse by a more than 20% margin than white workers on tips, and black women do the worst of all, so they stand to benefit critically from a “one wage” program.

Cooper’s report reminds workers and the public of a key fact about the “tipped” wage that the restaurant folks like to sluff over as they pretend to be concerned about their workers income.  The level between the tipped minimum whether $2.13 federally or over $3.00 in DC is a direct subsidy from the worker’s tips provided by the customers for their excellent service which is then effectively passed over to the employer until the DC minimum or elsewhere the federal minimum is reached, and that’s nearly $10 an hour.  What is left after the worker de facto pays their employer for their space on the floor or behind the bar is all that is gratis.   So even ignoring the basic democratic facts that the voters have spoken, how could this ever be fair?

I’m reminded of an organizing committee meeting of a bunch of carriage drivers in the French Quarter that we organized years ago.  At one union meeting an argument broke out when the members started debating whether their work was  “a job or a hustle.”  That says it all.  These are jobs.  They need to be paid with the respect, dignity, and wages that the workers deserve.  The rest is lagniappe.


Please enjoy Rosanne Cash & Sam Phillips’ She Remembers Everything.

Guiding Light by Mumford & Sons 

Carl Broemel’s Starting from Scratch.

Thanks to KABF.


Are New Obamacare Rules Another Step Backward for Low Wage Workers?

lowwageNew Orleans    It isn’t hard to understand the thinking behind the new IRS regulations to clarify the rules for employers who might be trying to hustle the margins on the Affordable Care Act and “dump” workers onto the system to save a couple of bucks.  The problem is that the rules completely ignore the reality of lower wage workers and the inadequacy of the ACA to provide them with basic health care in a flawed system dependent on shoring up private insurance companies.  Here’s why.

The new rules say that employers cannot fulfill their obligations by transferring money to workers to assist them in enrolling by paying their premiums and cost-sharing.  The IRS has effectively determined that so-called “employer payment plans” make employer contributions taxable and do not qualify to prevent penalties for not providing employee health insurance.  Part of this is based on an assumption that may hold true for large scale, legacy employers, but is non-existent in the service industry where so many lower wage workers are employed.   As Robert Pear writes in the Times:

When employers provide coverage, their contributions, averaging more than $5,000 a year per employee, are not counted as taxable income to workers. But the Internal Revenue Service said employers could not meet their obligations under the health care law by simply reimbursing employees for some or all of their premium costs.

As Local 100 of the United Labor Unions bargains with large regional and national healthcare companies on units with hundreds and thousands of workers, we grapple with this problem continuously.  These employers offer health insurance but historically the premiums have been so high for workers making less than $12.00 hour that participation was minimal, certainly less than 10% of the workforce and usually less than 3% of the workers, most of whom were confronting health issues so were willing to sacrifice paychecks for health coverage.  Now companies have giant loopholes which allow them to qualify their plans by reducing the premiums to less than 9.5% of income but putting no limits on the level of the deductibles, which are often ranging over $5000, effectively meaning that the workers in normal circumstances will be paying for so-called health insurance that will give them virtually no benefits.  All of these workers would be better served by accessing the marketplace and they would save money doing so because they would access subsidies and cost sharing support.  Because the Act in its current form is largely an insurance company support mechanism rather than a comprehensive health care alternative, we have been desperate to convince employers to work with us to find a solution that would not cost them anymore than they have to pay, but give the workers real coverage.  In state after state where the reimbursements for nursing homes, mental health and mental retardation, and other health support services have been frozen or cut, the companies aren’t sitting on extra money, so they’ve been listening, but now the mountain has become even higher to climb.

Oh, the new rules threw a scrap on the table for organizations like Local 100 and our partners who have been determined to help people enroll in Obamacare.

In a separate rule, the administration prohibits states from imposing onerous restrictions on insurance counselors, who educate consumers and help them enroll in health plans. Under the rule, states cannot establish standards that impair the counselors’ ability to help consumers or to perform other tasks required by federal law.

So, states will not be able to block the work of navigators, though unfortunately navigators will be forced to tell lower waged workers that their options are in many cases somewhere between bad and non-existent in service sector jobs.  The IRS regulations are meant to prop up private health insurance companies with more robust employer participation, but are presuming a workforce from the 1950’s, not the dominant lower waged, service sector employment of the 21st century.

This isn’t going to end well for lower wage workers and their families.