On Tuesday, voters in Washington went to the polls to decide whether to keep in place a special minimum wage for tipped workers that is lower than the minimum for other employees, or to raise that minimum to $15 an hour by 2025. Initiative 77, as the proposal was called, passed over strenuous objections from many quarters.
How this came to pass is a bit like Winston Churchill’s line about Russia: a riddle, wrapped in a mystery, inside an enigma. The riddle: Why did tipped workers make less money than other workers in the first place? The mystery: Why was anyone trying to change it? And the enigma: What will this do to restaurants?
Start with the riddle, because it is the easiest to answer. In many states, the law provides lower minimum wages for tipped workers because it is presumed they will make the bulk of their income from tips. Indeed, many do. Servers and bartenders can pull down $20 or $25 an hour, or even more at the fanciest places.
Forcing employers to pay those workers a higher minimum wage, on top of the tips they earn, would place a heavy burden on restaurants. Labor expenses typically account for more than a quarter of the cost of running a restaurant, even with the extra-low tipped wages factored in. Many of those restaurants run on lean margins, meaning there isn’t much profit left to trim to pay higher wages. Trying to compensate by raising menu prices might cause customers to decide they would rather eat at home, meaning fewer people employed overall in the industry. That has historically made policymakers leery of eliminating the tip differential.
Which brings us to our mystery: If tipped workers are making a decent living, and changing their minimum wage might cost jobs, how the heck did Initiative 77 even get on the ballot?
Well, not all tipped workers are fancy bartenders. They also include folks such as parking valets, who aren’t getting 20 percent of the price of a nice meal; they’re getting the crumpled single you found at the bottom of your wallet. Those workers might well be better off with a higher minimum, as might waiters at places such as IHOP, where the tip for a cheap meal doesn’t come to much. One way to look at these sorts of laws is as an effort to redistribute money not simply from customers and owners to workers, but from the higher-paid servers to those laboring for low tips or none at all.
And yet, that explanation doesn’t necessarily work in Washington, where inexpensive casual dining establishments are notably scarce. Journalists went to heroic lengths to find actual tipped workers who supported Initiative 77. A City Paper reporter went so far as to infiltrate Facebook groups and team up with a Spanish-language daily to interview Hispanic workers. She rather wistfully told CityLab that she thought they were out there, even though she had failed to find them. So we may have to mark this mystery “unsolved.”
And finally, the enigma: Well, good idea or not, we’ve done it, so what happens next? Is this the death knell for fine dining in the District?
You should discount the claims of an impending waiter apocalypse; seven states have already eliminated the low minimum wage for tipped workers, and they still have restaurants and, yes, tipping. But that doesn’t end the discussion.
In November 2016, Maine voters passed a referendum that would have gradually tripled the tipped minimum wage over eight years. And then a funny thing happened: Servers began actively lobbying the legislature to lower their wages. Some said they had already seen their tips decline because of the new law. Others were worried that, as the wage increased, diners would begin reducing tips — or begin staying away from the restaurants entirely.
The District is not Maine; Washington has an unusually high percentage of affluent diners. They can afford to pay more for their meals while continuing to tip. The tourist trade will also help, since most out-of-towners, unfamiliar with local minimum wage laws, would likely tip as normal.
Economic change is always complicated, its costs unpredictable. It seems safe to say Washington will not turn into a land of shuttered storefronts, and most servers will still have jobs. But some jobs will probably go away, or become less attractive, just as some diners will have to consider reducing their tips, switching to cheaper restaurants or eating at home. And restaurant owners will have strong incentives to economize on labor, or cut back on amenities such as free meals for employees. It’s impossible to say whether workers whose wages will be affected will be the majority. But however many there are, they probably won’t be too grateful for the “help” District voters just gave them.