Dive Brief:

• Washington, D.C., voters approved Initiative 82, which will increase the tipped minimum wage from $5.35 by a dollar or two each year until it reaches the full $16.10 minimum wage for non-tipped workers by 2027. 
• Currently, customer tips provide workers with additional earnings on top of their $5.35 hourly wage to reach the full minimum hourly wage, with employers supplementing the difference. 
• A similar initiative, which would have eliminated the tip credit and hiked the minimum wage to $18 in three years, failed to pass in Portland, Maine. 

Dive Insight:

Restaurant advocacy groups are split over whether the tip credit for subminimum wage employees helps or hurts restaurant labor. 

One Fair Wage claims eliminating the tip credit will allow restaurant workers to receive a livable wage.

“Since the pandemic, workers are no longer willing to work for poverty wages, and restaurants are raising wages to recruit staff — it's time to support these workers and restaurant owners and pass One Fair Wage across the country,” Saru Jayaraman, president of One Fair Wage, wrote. 

But cutting the tipped minimum wage could come with unintended consequences, such as operators trimming their workforces, hiking menu prices and adding surcharges, Sean Kennedy, EVP of public policy at the National Restaurant Association, wrote in an email to Restaurant Dive. Raising the minimum wage could also push restaurants to reduce shifts for staff members, and may cause a dip in new restaurants openings since operating costs would be more expensive, he said.

“The elimination of the tip credit is a lose-lose for restaurant owners, tipped workers, and customers alike,” Kennedy said. “The spread of these ballot initiatives will only serve to hurt restaurant workers and owners who chose restaurants because they want to support and engage with their communities. Forcing operators to change how they run their businesses and attacking the earning potential of tipped employees says to them that their career choices aren’t supported by their neighbors.”

The NRA argues that criticism of the tipped minimum wage stems from “widespread misunderstanding about how it works.” Tipped restaurant workers should earn at least the state’s minimum wage, the NRA said, because any time tips don’t add up to that minimum, operators are required to pay the difference. The organization found that tipped workers typically earn between $19 and $41.50 per hour on average, with a median of $27 per hour. 

It seems the issue of the tip credit has been especially contentious in Washington, D.C. In 2018, the District passed Initiative 77 to eliminate the tip credit, which was later overturned by the D.C. City Council after restaurant groups like Save Our Tips argued the initiative would actually reduce restaurant worker earnings.

The passage of Initiative 82 comes a few months after California approved the FAST Recovery Act, which will allow a council to regulate wages and worker conditions for fast food workers in the state. The law has already faced opposition and harsh criticism from the restaurant industry, with operators concerned this will increase overall costs.