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Proposal to Raise Tip Wages Resisted

Nearly 50 years ago, federal law created a lower minimum wage for workers who receive tips. Congress decreed that it could not be less than 50 percent of the federal minimum wage.

But when the minimum wage inched up—raised to $5.25 in 1996 under President Bill Clinton—Congress agreed, in a concession to the restaurant industry, to let the 50 percent rule on tip wages lapse.

Currently under federal law, restaurant owners are required to pay a minimum of $2.13 an hour toward a waiter's wages as long as customers' tips lift the waiter's pay to the $7.25 federal minimum wage. (If tips are too small to reach the minimum wage, then the restaurant is required to top off the waiter's pay.)

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Some 19 states use the federal $2.13 tip wage, while 24 states have set a subminimum tip wage above that. Seven other states, most of them in the West, require waiters' base pay to be at least the state minimum wage. In Washington State, with the nation's highest state minimum wage, that means a waiter's base wage, before tips, is $9.32 an hour.

And now, as some Democratic senators and President Barack Obama push to raise the minimum wage to $10.10 an hour, from $7.25, they are also backing increases to the tip wage (at $2.13, it is 29 percent of the minimum wage). Once again, the restaurant industry is fiercely opposed to a mandated increase.

Sen. Tom Harkin D-IA
Mandel Ngan | AFP | Getty Images
Sen. Tom Harkin D-IA

Pointing to studies showing that many waiters live below the poverty line, Sen. Tom Harkin, Democrat of Iowa, and chairman of the Senate Health, Education, Labor and Pensions Committee, argues that it is unfair that restaurant owners pay so little toward wages.

Advocates for restaurant workers protest that waiters' pay has remained flat for years. The tip wage alone has gone unchanged since 1991: Taking inflation into account, the $2.13 enacted back then is worth $1.24 today.

But the National Restaurant Association, which has played a pivotal role in keeping the tip wage unchanged, warns that if the tip wage is raised along with the federal minimum wage, customers will face higher menu prices and fewer waiters to serve them.

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Beyond the moves in Congress, labor unions and restaurant worker groups are pushing to raise the tip wage in various cities and states through legislation or ballot initiatives. They are also pressing New York's governor, Andrew M. Cuomo, to use his executive authority to raise his state's tip wage.

"There is a lot of momentum around the country to increase the tip wage," said Saru Jayaraman, co-founder of the Restaurant Opportunities Center, a restaurant workers' group.

Dana Dreher, who works 20 to 40 hours a week as a waitress at a McCormick & Schmick's Seafood and Steaks in St. Louis, says she makes $20,000 a year including tips. "I don't think the tip wage is fair—it definitely needs to be increased," she said. "There's so much variability in pay."

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"Sometimes I have to ask myself, Am I going to pay my rent or my utilities?" said Ms. Dreher, who has a master's degree in social work from Washington University but has been unable to find a job in that field and owes $60,000 in student loans. "Once there was a bad snowstorm and business was really slow, and my pay was really cut. I had to plead with the woman at the utility to give me a few more weeks to pay my electric bill."

There is considerable disagreement about pay levels for waiters. Sylvia Allegretto, an economist at the University of California, Berkeley, found that there were 3.3 million tipped workers nationwide, two million of them waiters, and that their median compensation was $9.22 an hour, including tips and tip wage.

"It's extremely variable—if you're working third shift in a diner in a truck stop in Nebraska versus if you're working at a steakhouse in D.C.," she said, noting that 72 percent of waiters are women.

The National Restaurant Association said median pay was $16 an hour for less experienced waiters and $22 for experienced ones. The association said its wage numbers were based on a Bureau of Labor Statistics survey of employers, while Ms. Allegretto's data rely on the bureau's household survey.

Scott DeFife, the restaurant association's executive vice president for government affairs, warns that any wage increases have a cost. "The cost comes from somewhere—prices might be increased, operations might be cut back, different food choices might be offered, hours of operation might be diminished," he said.

Mr. Harkin's bill, supported by the Obama administration, would increase the minimum wage to $10.10 an hour and raise the tip wage by 95 cents a year until it reached $7.10 an hour. It would then rise annually with inflation.

"The National Restaurant Association claims it can't afford to raise wages, but it says this every time we talk about raising the minimum wage," Mr. Harkin said in a Senate speech in December. Noting that the industry said it would be hurt badly by the 2007 minimum wage increase, which affected kitchen staff, Mr. Harkin said that "did not hurt the industry—in fact, the industry is doing remarkably well."

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Labor Secretary Thomas E. Perez, the administration's point man on the minimum wage push, said the tip wage "hasn't been raised for more than two decades despite increases in the cost of living." But given stiff opposition among top Republicans, especially in the House, the chances of an increase passing Congress in a midterm election year are slim.

Rob Green, executive director of the National Council of Chain Restaurants, criticized the push for a $7.10 tip wage. "We don't see it as a very realistic proposal," he said. "They want to increase wages by over three times for restaurant employees who are typically compensated well above minimum wage, when gratuities are included."

Worker advocates say restaurants can easily afford to pay a higher wage, but Mr. DeFife said restaurant profit margins were tight, usually 2 to 4 percent. Mr. Green said they ran 4 to 6 percent.

Tom Boucher, who owns a chain of seven restaurants in New Hampshire including Cactus Jack's and T-Bones, said the proposed $7.10 tip wage "would mean a significant increase in business costs." Noting that each of his restaurants employs about 12 waiters on Saturday nights, he said such a wage increase would reduce that number to 10.

"That would be terrible for customer service," Mr. Boucher said, although some restaurant owners say they would more likely raise menu prices than cut back waiters and hurt table service.

Mr. Boucher said that if he had to pay far more to his tipped workers, "that takes away my ability to give raises to a dishwasher, prep cook or line worker, who may make $12 or $13 an hour as opposed to the servers or bartenders who make $20 an hour."

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That's not Karlyn Dozier's story. Ms. Dozier, 34, recently stopped being a waitress at Coyote Blues, a Mexican restaurant in Metairie, La., in favor of making tortillas and overseeing takeout there because that position pays a straight $9 an hour, a dollar or so more than what she averaged as a waitress. She said she worked 28 to 30 hours a week as a waitress and averaged $250 a week in pay.

"It's not really enough for you to live off of," said Ms. Dozier, who has a 4-year-old son and used to be a waitress at Red Lobster. "I'm forced to live with my mother because I'm not making enough to live on my own. A lot of time I didn't make enough money to eat. I make sure my child is fed, but there were days I really didn't eat."

The Labor Department has long prohibited restaurants from requiring servers to share their tips with kitchen staff—notwithstanding a 2010 federal appeals court ruling, involving an Oregon restaurant, that concluded federal law did not bar restaurants from creating a tip pool that shared gratuities with back-of-the-house workers.

Many worker advocates want to see the tip wage abolished, asserting that some waiters are too scared to ask their boss to make up the difference when their tips do not raise them to the minimum wage.

Anatole Yameogo, a 49-year-old pizza deliveryman for a Domino's in Manhattan, said many workers balked when that happened. "You never ask anybody about that," said Mr. Yameogo, an immigrant from Burkina Faso. "You're worried they're going to fire you."

He said that even though New York's tip wage was $5.65 for deliverymen, he usually averaged just $10 an hour. "The tip wage is not enough," he said. "We have a hard job—we have to work when it's snowing or raining."

—By Steven Greenhouse, The New York Times

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