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| THE TIP CREDIT ISSUE |
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The Golden Gate Restaurant Association has been predicting
economic ruin for their industry if they have to raise wages without
a tip credit-a lower wage for tipped workers, on the assumption that
employers still have to pay payroll taxes on tips-yet almost no one
believes their claims that the average wage for a waiter if you include
tips is $35/hour. Furthermore:
• Tip exemption defeats
the whole purpose of a minimum wage, which is to set a guaranteed
and stable level below which earnings won't fall.
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Tips vary according to customer (many European tourists don't tip),
seasonality, shift, etc.
• Not all tipped employees
are servers in high-end restaurants like Gary Danko or Boulevard on
Friday or Saturday nights.
• Food preparers, dish washers,
and bus staff are often intended to receive tips but the monies trickle
down slowly or not at all. If their wages were cut for a tip credit,
many kitchen workers would be classified as tipped employees but never
get the money.
• The original point of a tip was not
for customers to subsidize employers but to reward exceptional service.
Employers should not look to customers to subsidize their payroll.
Tips are not wages
• As much as employers may scream,
California does not have a tip credit, yet our restaurant industry
has been booming. To say that because some states have been allowed
to pay their workers well below poverty wages that we should do the
same is ludicrous. Restaurant owners have been able to thrive here
without a tip credit. It is not up to us to subsidize their wages
further.
• Tips only increase as the tab increases.
So if certain servers are making more money than presumably the employers
are benefiting as well.
• Data shows that many restaurants
pass on increased operating costs to customers BUT the average increase
is 1%. A $50 dinner then becomes $50.50-hardly likely to drive customers
away.
• Many servers work shortened weeks because employers
won't schedule them for more, leaving them with low weekly earnings,
no health insurance and other benefits. So on any given shift they
might earn decent money with tips, but over the month they may still
be struggling to make ends meet. |
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| GOLDEN GATE RESTAURANT ASSOC. REPORT (APRIL
'03) |
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Methodological Problems:
• Their survey instrument intentionally set up bias-the
cover letter stated "our goal is to help public officials avoid
decisions that adversely affect our businesses."
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Only 64 responded to questions about non-financial information and
only 21 responded to statement of income and expenses questions!!
(out of 770 surveys that's an 8% and 2.7% response rate)
• Compare this to the UC Berkeley report-completely random,
designed to minimize bias and to account for non-responses. Our response
rate 42.3% and then weighed responses to make them representative.
GGRA's small sample size makes statements like "40% of restaurants"
misleading.
Lack of context about the economy and job losses:
• Between 2001 and 2003 there was a 1.9% drop in restaurant
employment but a 6.2% drop in employment in SF overall. (State Employment
Development Department data)
• Eating and drinking
sub-sector in San Francisco metro area added jobs between 1999 and
June 2003. Considering the total workforce has shrunk by 9% during
the same period, that's pretty impressive.
• Between
Feb. and April 2003 restaurants added 800 new jobs, largely erasing
the job loss of 1200 of the past year.
• Over past
12 years restaurants and food services grew at a rate more than 7
times the overall economy and 5 times the service economy.
• Despite dot-bomb and September 11th, restaurant employment
is 15% higher today than in 1995.
• Table service restaurants
posted the strongest gains in 2002 (+3.7%--according to SF Convention
and Visitors Bureau) |
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| INCREASED MINIMUM WAGES CAN POSITIVELY AFFECT
THE BOTTOM LINE |
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When wages are higher both employees and
employers have incentives to invest more in the relationship, leading
to decreased absenteeism, increased productivity, reduced turnover,
etc. San Francisco's Living Wage demonstrates that increased wages
yield positive economic and employment effects, as well as public
health outcomes. The wage level in the Living Wage is much higher
than the proposed minimum wage ($10 per hour with benefits, $11.25
without) with almost 10,000 workers affected and yet despite the same
allegations from business groups:
• No demonstrated
job losses
• Turnover fell an average of 34% for all
firms and 60% for firms that increased wages by 10% or more. Each
turnover costs employers about $4,250.
• Turnover rates
for baggage screeners declined from 110 to 25 percent resulting in
cost savings of $3.1 million.
• Firms and workers reported
increased overall work performance, customer service and worker moral
and decreased disciplinary issues and employee grievances.
• 25% of firms reported increased training which lead to productivity
increases. An increased minimum wage would add enforcement channels
that would benefit workers and employers who currently suffer unfair
competitive advantage because some employers currently violate existing
minimum wage laws.
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