Tag Archives: service industry

The Disappearance of Service Industry Safety Net Jobs

New Orleans     Perhaps the most dependable host on WAMF, our low power noncommercial radio station in New Orleans, has been a product representative for a fine local distillery in the city.  Her show every Tuesday afternoon, “Road to the Ramones,” is a rocking, eclectic mix with feminist and contextual highlights that keep you thinking with your ears.  When I’m around, as I was the other day, she will always poke her head in and say, “Hi,” before she prepares to go on the air.  Since she travels from stores to watering holes in a three-parish area, she has often been my street side barometer on everything from mask-wearing to venue closings.

She has been particularly dark in her predictions on when – or if – there will be a recovery in the industry here.  The dateline keeps moving back in our conversations from the fall to the winter to next spring, and, more recently, she believes never.  As she sees the clouds over the industry, she sees no return to what was, only that a survival-of-the-fittest for those willing and able to adapt, largely to takeout and delivery.  Yesterday, we engaged in some gallows humor in this city where the service, hospitality, and tourism industry rules.  We joked that there would be TV shows and movies in the future called “February 2020” that were nostalgia plays on the “good old days” before the pandemic changed the city, the country, and the world.

She had always enjoyed this job, but she said everything she enjoyed about the job – especially dealing with so many people – was gone.  Her company was now making hand sanitizer.  She had a master’s degree in social work, and was thinking about other career paths and what might be out there for her.

Then she said something that at one level was so obvious, but seemed profound, because it had slipped by me, as I tried to keep up with the markers of change being forced by the pandemic.  She said she was worried that the current collapse of the service industry and its potential long demise would be crippling to her and a generation of workers.  She, like so many, had always thought, “hey, if this doesn’t work out” or “if everything else falls through, I’ll be alright, I can always get a job as a server or tending bar or something in the service industry.” In effect, been there, done that, I’ll be OK.  Now that’s gone.

Labor economists, politicians, and others have always thought these minimal wage and tipped service jobs were for younger workers or first-time employment.  Sure in Las Vegas, the union has made these career jobs until recently, and even at lower pay, the same could be said in New Orleans as a convention, festival, and tourism destination, but these jobs, as my DJ was saying, are more than that.  They also served as “safety net” jobs for the working class.  Only gig-type jobs are at the bottom of that barrel now, and for all the approbation that might be cast at service jobs, at least they are jobs with hours, schedules and fixed locations.  Gigs are still just gigs, and no one is sure exactly what that means, other than it’s not enough to live on.

This is a fear without a name yet, but one that workers and the unemployed are seeing much more clearly than anyone else.

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Tipping is Not Only Bad for Workers, It’s Bad for Legal Businesses

tipsLittle Rock    Sara Jayaraman, the co-director of Restaurant Opportunities Centers United and director of the Food Labor Research Institute at the University of California at Berkeley recently wrote an impassioned op-ed largely trying to put pressure on Andrew Cuomo, the Governor of New York, to extend the increase in wages from fast food to all workers in the state. She made many excellent arguments including the racialized history of tipping, the progress in Europe in moving away from tips, and the low waged ghettos of largely women workers dependent on tips and often vulnerable because of that dependency, One argument she didn’t make is that by eliminating tipping as part of food service workers pay, we would be bringing the restaurant industry out of the gray market of dodgy, illegal wage practices and putting all businesses on an equal legal footing.

The Fair Labor Standards Act is clear. When tips are part of the income paid the worker, the employer is required to pay withholding, social security, unemployment, and workman’s compensation on the full sum of the wages paid. As every employer knows the full package often is 25% to 30% more than the wages themselves. The FLSA requirement is not just for restaurants using the $2.13 per hour tip credit wage and offset the gap between $2.13 and the federal minimum of $7.25 per hour my adding the tips in, but for all workers no matter what the hourly wages paid and what level of tips are collected.

Logically and justly, this is the way it should be obviously. A food service worker should have the same opportunity for unemployment as other workers and the same opportunity when they reach retirement to collect on their full and actual wages – including tips which often exceed their hourly pay – when they are elderly. The Department of Labor doesn’t live in a fantasy world, and there is no pretense that even a fraction of employers are paying the full package. Basically, they look the other way. There have been enforcement strategies where there has been a mandated percentage, starting at 8%, paid on the assumption of unreported tips dating back more than 30 years. Ironically, there are more rules and enforcement about employers keeping their hands out of the tip pool than there are rules to make employers pay what they are required in benefits for their workers on the tips.

All of which puts legal employers at a huge financial disadvantage in the market. Fair Grinds Coffeehouse in New Orleans is a 100% fair trade, small, social enterprise L3C business, supporting ACORN International’s community organizing in Latin America, India, and Africa. We pay a non-tipped minimum wage of $7.25 and a tip pool adds another $6 to $8 dollars per hour, depending on the season. We pay, as required, the full package of benefits to our workers. We are, in fact, members of ROC, but we are at a huge disadvantage in the marketplace as well.

Arguably, the straight wage is compensated by our community of customers that buy our coffee, tea, and food. The tips are hypocritical gratuity, where on both sides of the transaction the customer and worker pretend it’s a gift, knowing full well that it’s a vital part of wages. Fair Grinds though has no income stream that gives us the money to pay our 30% legal obligation on the tipped part of the wages though. We in effect are subsidizing the “gift” of the customer and the wage of the worker.

Meanwhile Starbucks acts like it’s a hero for paying $10 per hour and like almost all restaurant employers, looking the other way on the tips. And, the small time competitors just look the other way and hope they don’t get caught, while quietly and directly exploiting their workers. Danny Meyer, the big whoop high-end New York restaurateur, has gotten huge publicity for raising wages and eliminating tips at his restaurants and doing so by raising prices. Not sure why he gets praise for this, since he just saved his operation money, because if he were operating legally like Fair Grinds he would have been paying the package out of his own pocket, and now by raising prices he is paying his workers legally out of his customer’s pockets and clearing more money by doing so.

While people pretend to be oblivious of how workers’ pay and employers’ obligations work, social enterprises and straight shooters like a Fair Grinds who are not in a market position to simply charge a premium to cover the costs that our competitors ignore, businesses rip-and-run over their workers and their wages with the implicit permission of lax and lazy government enforcement and explicit support and pretense of their customers.

We need to end tips to put all workers on solid footing and all businesses that employ them on the same even playing field.

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