Submitted by SquishWindow t3_y8xu3d in washingtondc

I'm trying to make sure I understand the basics of this issue in a way that is clear somewhat balanced and would appreciate corrections w/r/t where I'm going wrong.

How tipped minimum wage works

The way restaurant wages currently work is that tipped workers don't have to be directly paid the prevailing minimum wage (I'll use $15/hr for simplicity) by the restaurant. Instead, their wages are made up of a tipped minimum wage (~$5/hr) plus whatever they make in tips (or, in their restaurant's share of tips, depending on how their restaurant handles tip pooling). In theory, if a tipped worker does not make enough in tips to hit the minimum wage, the restaurant is supposed to make up the difference with what is called a "tip credit" so they are always guaranteed to make $15/hr. So, in theory, this structure guarantees a floor of $15/hr for tipped workers while also allowing for the possibility that they may make far more than that if they get a lot of tips.

The risk of wage theft

In practice, some restaurant workers (DC estimated in 2017 it was about 5%) are subjected to wage theft and do not receive the $15/hr that is supposed to be guaranteed. My understanding is that this is because the tipped minimum wage of $5 is paid automatically via paychecks and would be very difficult to withhold (and obvious via paperwork & records), but the process of paying out tip credits to make sure that employees hit the required $15/hr is more informal and less automatic. (nb: I'm interested in being educated further on the mechanics of why tip credits can facilitate wage theft).

While wage theft is illegal and all these workers should be getting the $15/hr they are entitled to, in practice enforcement of wage theft is difficult, in part because it is burdensome for victims of wage theft (many of whom are unskilled workers who disproportionately are members of various marginalized groups) to have to bring enforcement cases and in part because bringing enforcement cases risks unwarranted conflict with their employers.

Edit thanks to /u/ch36u3v4r4 for noting that these problems may be even worse in industries outside of restaurants/bars that have a tipped minimum wage, where tips can be lower and less reliable and tip credits have to do even more work to make workers whole.

How Initiative 82 is supposed to help

One potential solution to the wage theft problem is to move towards a system where all $15 of tipped workers' guaranteed minimum wage is paid automatically & formally on paystubs the way most hourly workers receive wages. That's what the old Initiative 77 sought to do and what Initiative 82 would propose to do. No more $5 guaranteed minimum wage with a promise to make up the rest of workers' legal entitlement in either tips or a top-up, instead tipped workers would receive $15/hr guaranteed from restaurants.

Why some tipped workers are worried

There is some concern in the restaurant industry that if you shift to a model where restaurant workers are guaranteed to be paid minimum wage automatically, customers will adjust their behavior and no longer tip on bills. The theory being that in today's world, customers know that tipping is important to helping make sure restaurant workers actually make minimum wage, so once minimum wage was guaranteed before taking into account tips, customers will no longer feel as much pressure to tip and will stop doing it. If that happens, tips will dry up and the biggest losers will be service industry workers who make a lot of money on tips, like bartenders at busy bars. So while eliminating the tipped minimum wage may help some people at the bottom of restaurant wage ladder, it will come most at the expense of those at the very top who are able to make a genuinely pretty good living in the service industry and are able to stay in the industry long-term as a result.

If tips dry up, restaurants will no longer be able to rely on tips as a source of revenue that they can use to get their workers to $15 an hour, so that additional money is going to have to come from somewhere - either a service fee on bills (which would be even more likely to make tips fully dry up for restaurant workers who previously made a lot of $ on tips), raised menu prices, or lower profits (which would put many restaurants out of business). And opponents argue that if tips dry up, customers should expect lower-quality service.

Plus, as we all know, the pandemic has not been kind to restaurants or many restaurant workers, with that industry being among the absolute most hardest-hit two years ago, with plenty of disruption ongoing as restaurants figure out how to navigate increasing costs from inflation & supply chain disruptions, some degree of permanent shift towards takeout vs. dine-in, and the slow (and maybe never) recovery of downtown DC (and other central business districts around the country) due to increased telework. Restaurant owners & many workers are on edge about further disruptions to their business.

Why Initiative 82 proponents aren't fully on board with tipped workers' concerns

In order to believe that eliminating the tipped minimum wage would throw the restaurant industry into chaos with skyrocketing labor costs, it seems like you have to accept as a premise that underpayment and wage theft are rampant in the industry and necessary to many restaurants maintaining healthy financials. Otherwise, it is harder to explain why fully guaranteeing restaurant workers the minimum wages they are already supposed to be being paid would upend restaurant cost structures so much.

If that's the case, then it seems like the restaurants that would have the hardest time dealing with the policy change are ones that probably weren't treating or paying their workers fairly to begin with, and maybe those restaurants and restaurant owners are an acceptable loss in the shift towards fairer pay and eliminating wage theft.

Plus, proponents of Initiative 82 are not fully convinced that a shift to a guaranteed minimum wage across the industry will wipe out the availability of tips in the industry. Tipping is a deeply ingrained (though widely complained-about) cultural norm, and maybe if servers & bartenders were clear that they still expect and welcome tips, customers would still tip workers, albeit maybe not at exactly the levels you would get otherwise.

Is DC the first place to do this?

No. Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington have already begun trying this model, and Hawaii's policy (FYI this source is an advocacy piece from CAP) is also very similar. If anybody has good studies on what the results for restaurants & tips have been in those states I'd love to see & link them.

What do you think?

Am I missing important parts of the argument on either side?

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