TO SUM UP economics in one phrase, there is no free lunch. Benefits to a particular individual or group must be paid for, usually by imposing costs on someone else. The District’s voters are about to conduct a real-world test of this principle; fittingly enough, the context is the restaurant business.
The June 19 primary election ballot will include Initiative 77, a referendum to change how roughly 35,000 hard-working servers in D.C.’s red-hot restaurant scene get paid. Under current law, restaurants may pay servers who receive tips a lower minimum wage than, say, dishwashers get; this so-called tipped minimum will be $3.89 per hour as of July 1. Crucially, no one may lawfully get less than the full minimum ($13.25 on July 1). It’s just that employers do not have to make up the difference as long as tips do.
Initiative 77, principally supported by a union- and foundation-backed organization, the Restaurant Opportunities Center D.C., would require that servers, too, receive the full statutory minimum, with tips on top of that. The increase would be phased in by 2026, when the full minimum would be $15 per hour plus an adjustment for inflation between 2020 and 2026. Proponents argue this would eliminate the instability of tips as a source of income for working families and reduce pressure on tip-dependent servers to tolerate sexual harassment and other forms of customer abuse. There is validity to both of these points, which is part of the reason many expect Initiative 77 to win.
Supporters are far less convincing, however, on the question of who’s going to pay for this. This is one reason the D.C. Council rejected the idea in 2016 and why a majority of current members, as well as Mayor Muriel E. Bowser (D), oppose it now. No one can say for sure how restaurants will offset a roughly fourfold increase in labor costs, but there are only so many ways to do it: reducing hours, reducing jobs, cutting portions, substituting cheaper ingredients and, almost certainly, raising menu prices. In other words, restaurants will have to split the tab with their customers, their workforce or some combination of the two if they want to remain solvent.
Some servers who now take home more than the minimum wage might actually get a pay cut under Initiative 77, either because customers would tip less to offset the higher menu prices or because restaurant owners would substitute a mandatory service charge, which, unlike tips, D.C. law allows them to distribute to other workers as well as servers. The big losers may be lower-income consumers, for whom dining out is a special treat they might no longer afford if menu prices go up.
Washington’s restaurants developed on the basis of the “tipped minimum” system. Changing that is a complex matter best dealt with, if at all, through regular legislative deliberations, rather than a yes-or-no vote on a single option in a low-turnout primary election. It’s an election, by the way, in which many of those directly affected — workers, diners and business owners — will be ineligible to participate, because they live in the suburbs or are noncitizen immigrants. Voters who think there are better options, in both policy and process, will be voting “no” on June 19.
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