To Tip or Not to Tip?
Answers to frequently asked questions about restaurant wages
by Chris Busby
Last November, when Mainers voted to increase the state minimum wage to $12 an hour by 2020, they simultaneously mandated a gradual increase in the base wage that restaurant owners must pay their tipped employees — from $3.75/hour last year to $12/hour in 2024. The result of the tipped-wage increase has been, to put it mildly, a shit show — and we’re only three months in.
Thousands of Maine table servers and bartenders (along with their bosses) have organized a grassroots campaign to repeal the increase in their base wage — a sure sign that something is very wrong with the law. A public hearing in the Legislature on efforts to roll back the tipped-wage hike is scheduled for April 5, and members of the Facebook group Restaurant Workers of Maine (pop. 5,279 as of this writing) are expected to show up by the busload.
The Maine People’s Alliance, a liberal advocacy group that promoted the wage increases last year, is waging cyber warfare on social media with restaurateurs and servers who say the MPA is spreading misinformation, suppressing facts, and colluding with out-of-state interests to screw hard-working Mainers. The media, meanwhile, has made a hash of the issue, routinely misrepresenting what the applicable laws are and sowing confusion among the dining public, the vast majority of whom still have only a dim idea how restaurant workers are compensated.
The Bollard spoke with dozens of restaurant owners and workers, as well as advocates for the tipped-wage increase, in an effort to cut through the fog and give our readers a clearer picture of what’s going on. We present our findings as a series of “answers to frequently asked questions” which, of course, no one actually asked us to answer.
Q: What is the so-called “tipped minimum wage” or “tip credit”?
A: If you only retain one fact after reading this piece, let it be the fact that the state minimum wage applies to all Maine workers, tipped or otherwise. Advocates on both sides of this issue have failed to acknowledge this reality (intentionally or otherwise) when pushing their agendas, and the media accounts I’ve read fail to make this crucial point clear.
Here’s the deal. Employers in the restaurant industry are legally allowed to pay their tipped employees a lower base wage (currently $5/hour, at minimum) in recognition of the fact those workers get tips that are not shared with the boss. During any given pay period (typically a week or two weeks), if that base wage plus the server’s tips does not equal the amount of money the server would have earned had he or she only received the minimum wage (currently $9/hour), then the employer must make up the difference. The “tip credit” is the industry term for the money employers don’t have to pay workers whose earnings meet or exceed the minimum wage with their tips. Last fall’s ballot initiative eliminates the tip credit entirely by 2024.
Q: Is that lower base wage what people are talking about when they refer to servers making a “sub-minimum wage”?
A: Yes, and that’s the source of much of the confusion. Again, no one can legally be paid less than the minimum wage. When advocates of the tipped-wage increase claim that servers get shafted with a “sub-minimum wage,” they’re bullshitting you, because all servers must make at least the minimum wage during every pay period. Similarly, when restaurant owners urge customers to tip because their employees “only make $5 an hour,” they are being less than truthful, because they’re obligated to ensure all their workers earn at least $9/hour this year (or $10.68 in Portland, which set a higher minimum than the state’s).
Q: So, if tipped workers are already guaranteed to make at least the full minimum wage, what’s all the fuss about?
A: The main point of contention is the gradual elimination of the tip credit. Restaurateurs will see their labor costs for tipped “front of the house” staff more than triple by 2024 as a result of this measure, but those workers will not actually make more money as a result, since they were already entitled to receive at least the minimum wage, which will be $12/hour in 2020. It’s much more likely that tipped workers will experience a significant loss of income.
Servers are worried that customers who think their waitress or bartender has just gotten a big raise will tip less, or stop tipping altogether. Based on news accounts, diners may reasonably figure, “Hey, I just voted to increase your pay from $3.75/hour to $12/hour, so you don’t need any extra cash from me anymore — your boss will pick up the slack.”
According to servers and restaurant owners in the Portland area, it is exceedingly rare for an employer to need to pick up any slack because the worker didn’t make the minimum wage during a pay period. And the typical hourly wage, including tips, that servers earn around here is well over $20/hour. In the summertime, it’s not uncommon for servers to make over $30/hour. If patrons stop tipping in response to the tipped-wage increase, most servers’ take-home pay will be halved, or worse.
Q: What arguments are the proponents and opponents making to justify their positions?
A: Ali Monceaux (a waitress formerly employed at an Applebee’s in Windham who now works at The Corner Room, in Portland) and Eliza Townsend, Executive Director of the Maine Women’s Lobby, made essentially the same three main points to back up their belief that the tip credit should be axed.
The first is that they think the previous system put an unfair burden on tipped workers to keep track of their hourly income and notify their employer if they did not make at least the minimum wage during a pay period. Bringing this deficit to the boss’ attention can also reflect poorly on their work performance, they said.
Secondly, Monceaux and Townsend contend that the need to earn tips to supplement a low base wage makes servers (most of whom are female) vulnerable to sexual harassment from customers. Servers are compelled to put up with such harassment because they need the money, according to this argument.
Thirdly, advocates predict that tipping will not decrease as a result of this change. They say that in the handful of states in other parts of the country where servers are paid a base wage by their employers that equals or exceeds the minimum wage, those servers make just as much money as those in states with the tip credit.
Opponents counter the first argument by pointing out that it’s rare for a server to make less than the minimum wage once tips are factored into their compensation, and restaurants with a competent bookkeeper or payroll service usually catch any deficits and adjust pay upward without making a big deal about it.
Opponents don’t dispute that sexual harassment can be a problem in this industry, but they say that making wholesale changes to the compensation system is not an effective way to address a problem more rooted in social and cultural behaviors; they say greater awareness of the issue and staff training would be more effective.
Lastly, the argument that this change will not lead to a decrease in tipping is a gamble its proponents are making in which the stakes are the servers’ livelihoods and the bet is a bad one, opponents say. Restaurant owners will need to cover increased labor costs by increasing prices and/or cutting back on service, changes that compel customers to tip less and/or dine out less often. In an op-ed last month for the Brunswick Times Record, titled “Reinstatement of the Tip Credit is not a Political Battle, it’s Math,” Buck’s Naked BBQ co-owner Wendyll Caisse provided figures that show how the tipped-wage increase will soon make operating a restaurant in Maine financially untenable.
So-called “back of the house” employees who don’t get tips (like cooks and dishwashers) would also see their pay stagnate or decrease over time as overall labor costs increase every year. Arlin Smith, co-owner of the Portland restaurants Hugo’s, Eventide and The Honey Paw, said the ability to pay tipped front-of-the-house staff a lower base wage is what enables his businesses to pay back-of-the-house workers a competitive, livable wage. Smith estimated that the tipped-wage increase this year alone, from $3.75/hour to $5/hour, will cause labor costs to rise at the three establishments by at least $55,000.
Comparisons with states and cities in other parts of the country are not reliable indicators of what the effects of this law will be in Maine, Smith and other opponents say. Tipping is a cultural practice that varies from one region to another. Maine’s relatively older and sparser population, and the outsized impact seasonality has on our economy (booming in summer, busted in winter), all make the economics of the industry in this state unique.
“I think people are going to be shocked by how bad this will be for Portland, considering it’s such a foodie town,” said Sarah Martin, who worked as a waitress and bartender for decades before opening her own establishment, Bar of Chocolate, in the Old Port. The money she made as a tipped worker in Portland enabled her to buy a house and open a business in the city.
Advocates of the tipped-wage hike are “putting the most vibrant industry in the state at risk,” said Gritty McDuff’s co-founder Richard Pfeffer. “It’s a recipe for disaster.”