We live in a politicized world. When a policy issue is being discussed — nearly any policy — the opposing sides often rely on intentionally inciteful language to persuade, dissuade and manipulate voters into seeing their side. There are a number of tactics that are used: false equivalencies, straw men, sweeping generalizations, historical inaccuracies and so on — these are called logical fallacies. There is another thing that also gets used sometimes, and that’s outright deception (sometimes called an appeal to ignorance, which means someone is not informed on a topic and the deceiver acts on that).
On the City of Portland’s November ballot, one of the five citizen initiative questions is titled Question D – An Act to Eliminate the Sub-Minimum Wage, Increase Minimum Wages and Strengthen Protections for Workers. Here’s the thing: There is no such thing as a sub-minimum wage.
The tip credit, which would be eliminated if this passes, basically says tipped employees (meaning servers and bartenders) can get paid half the minimum wage per hour, so long as they make the rest of their hourly wage up with their tips. If they don’t make up what the minimum wage is with their tips, then the employer will pay them for that shift whatever they need to ensure they make at least the full minimum wage.
To be honest, it’s quite rare for a server not to make up their hourly rate in tips. Joshua Chaisson, whose column I referenced last week, said he makes over $40 per hour with tips at his “modestly priced” Portland restaurant. In 2016, the 14-hour committee hearing I referenced four weeks ago had servers testifying under oath that they regularly make $25-$35 per hour or more.
Do the math yourself. For the tip credit, servers need to clear $6.38 per hour in tips. For a four-hour shift that’s $26. Now ask yourself, when was the last time you left less than $5 for a tip or less than $1 per beer for your bartender? It’s not hard to get to $7 per hour in tips — even at the most affordable establishments, servers can easily pull that. Maybe they don’t during a snowstorm or when there is a construction project on the sidewalk out front or other rare times, but when that happens, the employer then pays them the wage for the tips they did not get.
Why does the sub-minimum wage term exist then? Why is it in the title of the Question D? Because it’s supposed to tick you off. You’re supposed to get real mad and become hypervigilant against the employer. The proponents of this question want to deceive you with a false term and imply that the severs make less than minimum wage, when hundreds of servers swore under oath six years ago that they make more than $25 dollar per hour. They don’t want you to know the owners make up for tips not made on the perhaps one shift per month when it happens. It’s intended to deceive you.
Here’s another common fallacy: “Why can’t you have a full minimum wage plus tips? There’s nothing that says you can’t have both.” Except the numbers don’t work. We found this out in the six months the tip credit was eliminated back in late 2016 and early 2017. The reason it doesn’t work is because restaurants have notoriously the slimmest profit margins of any industry. Most reports say the margin is 1%-3%, but some studies say it could be 3%-6% — slim either way.
For nearly every business, the top three expenses, in some order, are: payroll, building costs (rent/mortgage, utilities, heating/cooling, etc.) and inventory. When you say, “pay servers and bartenders full minimum wage,” you are precisely doubling the payroll cost for those restaurant servers (not to mention likely slowing the pay increases for non-tipped restaurant workers like cooks, which is not the point today).
On a very basic level, the employer needs to make up for that doubling of payroll by either cutting expenses or increasing revenue. Cutting expenses either means cutting shifts/people or reducing other costs like quality of food and inventory. Increasing revenues can be done basically one way because there is not a diverse revenue stream: increasing menu prices. Some may say, “More people will come out to eat so that will add revenue,” but there is no direct correlation between increased wages and more customers.
What some restaurants did in 2016, when facing an estimated 20% increase in their costs due to the payroll change, was to go to a no-tipping model. Essentially the idea is, “Hey, we increased the menu items by 20%, but you don’t have to tip anymore so you’re basically paying the same thing as before.” It was a disaster. Google it. Google “no tipping model restaurant” and for every positive story you will find three negative ones. Nearly all restaurants in nonaffluent areas cannot make a no-tipping model work.
It’s easy to see why. Customers will only pay so much for menu items. Nobody wants to pay $30 for a burger and fries. Look at the meat prices in the grocery store. Look at the vegetable prices. Add it together. Now factor in the price of labor to cook it. You can see why it adds up so quickly.
Now add to that that the server serving it to you doesn’t make $25-$35 anymore they make $12.75 — or $18 if the Portland referendum passes. Now that server, who chose this job based on the tips they can make in less than a 40-hour work week, can’t maximize their hours; they just get paid a flat rate regardless of their service level.
We’ll get into that part of this complex topic in the final column in this series next week. Reminder: Don’t take my word for it; ask your favorite server or bartender. They love the tipped model and don’t want it changed.
Cory King is the executive director of the Bath-Brunswick Regional Chamber.
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