Tag Archives: tipped 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.

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

Guiding Light by Mumford & Sons 

Carl Broemel’s Starting from Scratch.

Thanks to KABF.

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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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