Minimum Wage For Restaurant Servers Remains Stagnant For 20 Years Under Industry Lobbying
The Huffington Post, June 2, 2012
By Dave Jamieson
Rebecca Williams has waited tables, on and off, for 30 years. A lot has changed since her first stint in the business ended in the early 1990s. Restaurants now tout their commitment to local and organic fare. Diners eagerly pass and poke at tapas-style small plates. Chefs at brick-and-mortar restaurants now compete with a growing legion of food trucks. But one thing that's remained consistent in all that time is Williams' paycheck.
Williams, 50, has worked mostly at upscale bistros in Atlanta, Ga., earning $2.13 an hour before tips. It's the most frustrating element of a job she largely enjoys, she says. That miniscule wage is usually swallowed up by taxes, leaving her to live on her tips, which can fluctuate from week to week.
She hasn't had health care coverage for years. The restaurants she has worked in haven't offered affordable plans, and she doesn't have the money to pay out of pocket for it. She simply hopes she doesn't get sick.
As for retirement? "I can't even think about retirement," says Williams. "I'd go into shock." Her restaurants haven't offered savings plans, either, leaving her with little beyond a modest 401(k) nest egg from a long-ago foray into the corporate world.
But since 1966, a sub-section of the minimum wage has existed for people who work for gratuities, known as the "tipped minimum wage," which Congress last bumped to $2.13 per hour in 1991. Some states have increased the tipped minimum wage on their own as well –– and Washington, like six other states, has no tipped minimum wage at all, so servers earn a full $9.04 before gratuities. About half of all states, however, continue to allow restaurants to pay servers $2.13, provided they make up the difference if the server doesn't reach the standard minimum wage after tips.
The cost of living, meanwhile, has continued to climb.
"As far as income goes, I made more 20 years ago than I do now, effectively," says Williams, who has a bachelor's degree but prefers to work in restaurants. "My affluent friends, their jaws drop when I tell them."
Under this system, gratuities aren't really gratuities. They constitute the vast majority of a server's salary. Instead of giving a server a bonus for good service, diners are essentially subsidizing many servers' legally guaranteed wages.
And as the tipped minimum wage has remained the same, diners have been subsidizing a growing portion of that guaranteed wage over the years. Servers, meanwhile, are increasingly relying on customers to keep them on pace with inflation.
Being paid a mere $2.13 an hour before tips might not be a big deal for a server at a four-star restaurant in Manhattan, where tips are generous and workers can earn a better-than-decent living. But for a career server working at, say, a pancake house in rural Kansas, an extra couple of bucks an hour could make a huge difference.
If Williams' pre-tip wage in Georgia were closer to $5 an hour, for example, like it is in many states, that would translate into an extra $6,000 per year, making it a lot easier to cover basic expenses. Maybe she would even be able to afford health insurance.
HERMAN CAIN'S LASTING LEGACY
The fact that the tipped wage has held steady for over 20 years at the federal level and in many states is a testament to the restaurant lobby's effectiveness.
In 1996, President Bill Clinton pressured Congress to raise the minimum wage for the first time in years. He ultimately got House Republicans on board with the wage hike, but not without a significant caveat.
The restaurant industry, led by the National Restaurant Association –– and its board chairman Herman Cain, who would later become the group's president –– successfully pressured lawmakers to have the minimum wage for tipped employees separated from the increase and kept at $2.13.
"I don’t think anyone knew at that point that it was a permanent deal," says Jen Kern, minimum wage campaign coordinator at the National Employment Law Project, an advocacy group for low-wage workers. "As these things happen ... they become ingrained. They succeeded in creating this second-class wage system, and people accepted it as the way it's always been."
Indeed, paying the lowest wage possible before tips is common practice throughout the restaurant industry. According to advocates for restaurant workers, even restaurants that workers hold in high regard tend not to pay servers anything more than the tipped minimum wage, since that's all the law mandates.
Those who say the tipped minimum wage is due for an increase argue that the growing restaurant industry can withstand it. Throughout the fits and starts of the economic recovery, the restaurant sector, much like retail, has served as one of the few reliable bright spots when job numbers are issued.
In its recent 2012 forecast, the NRA predicted record restaurant sales of $632 billion this year. It said the number of jobs in the industry would grow to nearly 13 million, accounting for roughly one-tenth of the nation's workforce and outpacing the economy at large.
The problem, however, is that many restaurant jobs are low-paying. The average wage for food and beverage workers was $18,130 in 2010, according to the Bureau of Labor Statistics, meaning that many workers end up toiling below the federal poverty line.
And even as the number of jobs has expanded, the wages received for those jobs have actually decreased, according to a recent report from PayScale, a website that tracks salary data.
"This is part of the stagnation we've seen for all workers over the last 20 or 30 years," says Sylvia Allegretto, a labor economist at the University of California, Berkeley and a former waitress herself. "This industry is growing by leaps and bounds, but it's not paying a good wage. The fact is we have millions of workers in this industry, and a few of them do fairly well –– mostly men, at high-end restaurants."
But the mostly female workforce of servers, she notes, has "no health care, no sick pay, no vacation. You have to make enough in wages and tips to pay for those things."
"I don’t know how anyone can defend a policy that’s been in effect for over 20 years, that’s eroded significantly in that time," she adds. "Why should this industry benefit so much from this artificially low pay that’s instituted?"
The NRA, for its part, says that the industry's growth is no reason to hike the tipped minimum wage. The group says that most servers already earn well above the federal minimum wage of $7.25, and that raising the tipped minimum wage could hurt kitchen employees and others who don't work for tips.
"Even in a challenging economy, the restaurant industry has continued to be one of the country’s leading job creators," Katie Niebaum, a spokeswoman for the group, says in an email. "Legislation increasing the required minimum employer-paid wage for tipped employees would force employers to redirect payroll dollars away from employees who do not earn tips, and give them to tipped employees who are usually earning far in excess of the minimum wage."
Michael Saltsman, a researcher at the Employment Policies Institute, a conservative group that argues against higher minimum wages, says the status quo is acceptable. "Instead of a carveout [for restaurants], I think it's an acknowledgment of a unique business reality," he says. He cites a study by his group finding that raising the tipped minimum wage ultimately reduces hours for tipped workers.
"You're left with tough options" if restaurants are forced to pay higher wages, he says. "You can't just absorb it. You either pass it on to customers or figure out how to do more with less. It's difficult to say to customers, 'We need you to pay more.'"
Of course, even a higher tipped wage doesn't necessarily mean a living wage. In most pockets of the country, what's considered a living wage is considerably higher than the legal minimum, sometimes even double. But even a small increase in the tipped minimum wage could make a big difference to a lot of workers.
'JUST HAPPY TO GET A CHECK'
Restaurants also justify keeping the tipped wage at $2.13 by citing the fact that workers are still guaranteed the full minimum wage after tips. Proponents of a higher minimum wage, however, say the onus shouldn't be on workers to demand the difference from their bosses when they don't earn a legal wage after gratuities.
Morena Menjivar, a 26–year-old in Washington, D.C., says she worked many shifts at a Latin American restaurant during which she hadn't earned the minimum wage by the end of the day. She typically made $300 or $400 a week waiting tables, but during dry spells it could be as little as $200, making it hard for her to cover rent and food. She says she wasn't aware her boss could have been obliged to make up her minimum-wage shortfall, and if she had been, she wouldn't have been comfortable asking.
"At the time, I didn't really know," says Menjivar. "I was just happy to get a check."
Menjivar eventually left the restaurant for a job as a barista, and says she's much happier now working for $9 an hour and relying less on tips.
She'd probably be even happier at a place like the Black Star Co-op, a bar-restaurant in Austin, Texas that operates as a cooperative, rather than a top-down business. Servers there don't work for tips –– gratuities are forbidden, although some patrons try to leave them behind anyway. Wages begin at a flat rate of $12 per hour and quickly move up to $16, says Mark Wochner, president of the co-op's board.
"We want to pay our people a living wage," says Wochner. Working for wages as opposed to tips, "You have a much better idea of cash flow. That's really important to us ... At Black Star, when you know your hours, you know your salary."
But most restaurant workers' pay will fluctuate from week to week due to the whims of customers, while the flat rate of $2.13 remains the same.
As the federal minimum wage has languished, many states have enacted their own, higher minimum wages for servers. But state restaurant lobbies have frequently tried to block or even roll back local increases to the minimum wage, or the passage of worker-friendly legislation like bills mandating paid sick days.
Earlier this year, the Florida restaurant lobby pushed a failed bill that would have effectively dropped the tipped minimum wage in the state from $4.65 to $2.13, provided that businesses guarantee that their workers earn at least $9.98 per hour after tips. One of the prime backers of the legislation was Florida-based OSI Restaurant Partners, owners of Outback Steakhouse and Carrabba's Italian Grill and a major Republican donor in the state.
Similarly, a GOP-backed bill in Arizona would have lowered that state's tipped minimum wage of $4.65 by more than $2, among other measures, although restaurants would still have been legally obliged to cover any difference if the server didn't clear the standard minimum wage of $7.65. That bill also failed, though the state restaurant association has said it will take its minimum wage fight to the ballot in 2014.
MOVING THE WAGE FLOOR
Raising the minimum wage has not been one of President Barack Obama's priorities while in office, despite a campaign pledge to raise it to $9.50 by the end of 2011. Nevertheless, Sen. Tom Harkin (D-Iowa) has introduced a legislative package that would push the minimum wage up to $9.80 and index it to inflation. It would also raise the tipped minimum wage to $6.86 and peg it to 70 percent of the standard minimum wage going forward.
Such a bill would have little chance of making it through a GOP-led House that's been closely allied with industry groups.
Perhaps one reason the tipped minimum wage hasn't moved is because many legislators and their aides don't seem to understand it or even know that it exists, according to low-wage worker advocates who lobby on the issue.
Williams, for instance, once reached out to her own congressman, Rep. John Lewis (D-Ga.), to complain about the tipped minimum wage. She says someone from Lewis' office responded with concern, apparently unaware of the issue. Lewis has since signed on as a co-sponsor to a House bill that would raise the tipped minimum wage to 70 percent of the standard minimum wage. "The [congressman] has long been a champion of the need for paying a living wage to all workers, so not simply raising the minimum wage, but insuring that the minimum is also a living wage," a spokeswoman for Lewis said in an email. (Perhaps showing the general lack of familiarity with this issue, the spokeswoman herself wasn't aware of the tipped minimum wage until HuffPost reached out for comment.)
Williams says the disconnect between Congress and servers is extreme. "How much did Congress get paid [in 1991] and how much do they get paid now?" Williams asks rhetorically. Senators were paid $101,900 in January 1991, compared to $174,000 today. That translates into a 71 percent raise over the course of two decades.
Allegretto said that she once gave a presentation on the tipped minimum wage to a group of economists and others at the Federal Reserve in Washington. She asked attendees to raise their hands if they knew the wage floor at restaurants hadn't moved in roughly two decades.
"Very few hands went up," she says. "People in economics have no clue that this has been going on for more than 20 years. People say, 'When I used to waitress it was $2.13.' Well, it still is."
Raising the federal minimum wage for servers has become the holy grail for Restaurant Opportunities Center United, a national workers' group that was founded in New York City in the wake of 9/11. It now has affiliates in nine cities. One of the group's top objectives is to have the tipped wage raised nationally and pegged to inflation, so that it climbs with the cost of living in perpetuity.
Saru Jayaraman, the group's co-director, says that kind of boost would bring low-wage tipped employees closer to receiving a living wage.
"We have to win the tipped minimum wage. We have to," says Jayaraman. "It’s the greatest demonstration of the imbalance of power between employers and workers in this industry and the greatest outrage."
Williams says that thinking about the minimum wage makes her want to "start a movement."
"The money is meaningless [for employers] at $2 an hour, and they're getting more and more out of workers," she says. "If we can get $6 or $7 an hour –– and I don’t think that’s unreasonable –– I think we'd be treated better and we'd get better training. I think it would make businesses be more respectful to the staff."
"I don’t see restaurants in the states that do pay more going under," she adds.