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Restaurants Flourish with One Fair Wage

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Restaurants Flourish with One Fair Wage BETTER WAGES, BETTER TIPS Restaurants Flourish with One Fair Wage FEBRUARY 13, 2018 BY RESTAURANT OPPORTUNITIES CENTERS UNITED BETTER WAGES, BETTER TIPS: Restaurants Flourish with One Fair Wage THERE ARE SIX MILLION TIPPED WORKERS ACROSS THE NATION, the vast majority women and disproportionately workers of color.1 Under federal law these workers can be paid as little as $2.13 an hour, with the remainder of their income derived solely from tips. As a result, tipped workers live in poverty and depend on food stamps at rates twice that of the general population.2 Since 1996, when the tipped subminimum wage was frozen at $2.13, workers have been abandoned by federal wage policy. Seven states have adopted equal treatment for tipped workers ensuring all workers one fair wage, independent of tips. In those seven states: EXECUTIVE SUMMARY EXECUTIVE • Sexual harassment is lower than in the subminimum wage states that maintain an unequal treatment regime. Tipped women workers who earn a guaranteed wage report half the rate of sexual harassment as women in states with a $2.13 minimum wage since they do not have to accept inappropri- ate behavior from customers to guarantee an income (Figure A). Tipped women FIGURE A workers in $2.13 states report that they are three times more likely to be told by INCIDENCE OF SEXUAL HARASSMENT management to alter their appearance and to wear ‘sexier,’ more revealing clothing BY WAGE REGION (±2*SE) than women in equal treatment states.3 Workers in equal treatment (OFW) states experience half the rate of total sexual • Wages including tips are unambiguously higher than in the 43 harassment, compared to workers in unequal states that maintain an unequal treatment regime. The median wage treatment (subminimum wage) states. for tipped restaurant workers in one fair wage (OFW) states is $11.44, surpassing Source: ROC United, 2014. the median wage of $9.57 in states with a tipped subminimum wage, both including tips. The $9.57 median wage for restaurant tipped workers in subminimum wage .18 states is even lower than the wage of the lowest 10 percent of earners in OFW $2.13 states at $9.66 (Figure B). The median wage for bartenders and servers, restaurant TIPPED tipped workers providing direct service in New York is $10.98 in New York and $9.22 .16 WAGE in Michigan, compared to $12.40 in California (Figure C). STATES .14 • Restaurant tipping rates remain constant across the country, but servers earn the highest tips in San Francisco, higher than in New York City or Washington, D.C. Tipping rates vary around the country, ranging .12 from a low of 14.9 percent in Washington, D.C. to a high of 17.1 percent in Alaska, ONE but remain constant by OFW and $2.13 regions at 16 percent. Rates in New York and .8 WAGE Michigan are 15.7 percent and 16.6 percent, respectively. Tipping amounts reported STATES by workers do not statistically vary between OFW and subminimum wage regions. However, among higher earners, servers in equal treatment cities report higher wages .08 MEAN TOTAL SEXUAL HARASSMENT SEXUAL MEAN TOTAL and higher tips than their counterparts in unequal treatment states (Figure D). • Restaurant sales are higher. Sales were expected to grow by 5.1% in OFW states in 2017, compared to 4.2% in $2.13 states. Restaurant sales in New York were projected to grow by 3.6 percent, a rate lower than the individual rates of six of the seven equal treatment, or OFW states.4 OFW states also have the highest restaurant sales weighted by population, over double the rate of sales in $2.13 states and 13 percent higher than in New York.5 OFW states also outperform the rate of sales per full service employee in $2.13 states by eight percent.6 • Restaurant employment rates are equal or higher. From 2011-2016, full service restaurant employment (FSRE), where tipping is concentrated, grew by Tipping practices are not 20.4 percent in OFW states. States with a $2.13 subminimum wage did not fare as associated with the underlying well; FSRE grew by 16.37 percent during the same time period. FSRE grew by 20.13 wage. Equal treatment states percent in New York and 13 percent in Michigan.7 have more robust wages, sales, • Restaurant establishment growth is equal or higher. The number of establishment, and employment full service restaurants (FSR) has steadily increased over the last five years. From growth than their counterparts in 2011-2016, FSRs in OFW states grew by 9.44 percent, compared to 8.8 percent in unequal treatment states. 8 $2.13 states, 4.88% in New York, 8.7 percent in Michigan, and 13 percent in D.C. IT IS TIME FOR THE • Poverty rates, especially for workers of color, are much lower RESTAURANT INDUSTRY TO than in subminimum wage states. In OFW states workers of color experi- ADOPT ONE FAIR WAGE. ence poverty levels 27 percent lower than in $2.13 states, 17 percent lower than other states with a subminimum wage, and 10 percent lower than New York.10 FIGURE B FIGURE C FIGURE D TIPPED RESTAURANT WORKER WAGES MEDIAN WAGE FOR DIRECT SERVICE MEDIAN HOURLY WAGE AND TIPS BY REGION AND DECILE WORKERS IN MI, NY, AND CA FOR FINE DINING SERVERS ARE Tipped restaurant workers in equal treatment Median hourly wage including tips for HIGHER IN EQUAL TREATMENT (OFW) states earn higher wages at every bartenders and servers in Michigan, New (OFW) CITIES. income decile than workers in unequal York, and California. Median hourly wage and tips for fine treatment (subminimum wage) states. Source: Bureau of Labor Statistics, Occupational dining servers are higher in equal Employment Statistics, 2016. Source: Bureau of Labor Statistics, Occupational treatment (OFW) cities. Employment Statistics, 2016. Source: PayScale, 2015. $4 $8 $12 $5 $10 $15 $20 WASHINGTON DC UNEQUAL TREATMENT $5.30 MEDIAN HOURLY WAGE 10% $9.22 $8.50 MEDIAN HOURLY TIPS MEDIAN MICHIGAN 90% NEW YORK CITY $10.98 $5.80 EQUAL TREATMENT NEW YORK $9.50 10% SAN FRANCISCO MEDIAN $12.45 $9.60 90% CALIFORNIA $11.90 INTRODUCTION The true federal minimum wage in the United States is $2.13 per hour. ipped employees, workers that receive a portion of their compensation through tips, have not received a federal wage increase in over 27 years.11 Since the proliferation of tipped labor, following the end of slavery, until the 1966 amendments to the Fair 81% Labor Standards Act, tipped workers worked solely for tips. From 1966 until 1991, the PERCENT T tipped wage crept up to its current level of $2.13, and was decoupled from any further OF TIPPED increase in 1996.12 This means that over the last century and a half, tipped workers have experienced WORKERS IN an increase of a little fewer than one and a half cents a year.13,14 RESTAURANTS In response, seven states have adopted an equal treatment wage system with only one minimum wage independent of any tips received, but 43 states and the District of Columbia retain the antiquated tipped subminimum wage system. There are 18 states where tipped workers earn the federal subminimum wage of $2.13 an hour, and an additional 26 states that pay a tipped minimum wage of over $2.13 an hour, but below the full minimum wage.15 With historically low wages, tipped workers depend on tips 66% PERCENT OF from the customer for a majority of their income. Although employers are required by federal law to RESTAURANT ensure that tips bring tipped workers up to the overall minimum wage of $7.25 an hour, the U.S. Depart- WORKERS ment of Labor reports pervasive non-compliance with this regulation.16 As a result, tipped workers, ARE TIPPED from the 43 states with a tip-penalty access the social safety net and live in poverty at higher rates. WORKERS Restaurant tipped workers in the 43 subminimum wage states depend on food stamps at 1.7 times the rate of the overall workforce and experience poverty at 2.2 times the rate, the numbers for tipped workers as a whole are the same.17 While restaurant workers comprise almost 81 percent of the overall tipped workforce, a substantial number of tipped workers are in occupations such as healthcare sup- port, personal care, and transportation.18 16% TIPPED WORKERS There are nearly six million tipped workers in the United States, with a median age of 30.19 People ARE ON FOOD STAMPS of color (Latinos, Blacks, and Asians) are overrepresented, comprising 41 percent of this workforce, 2.1X REST OF U.S. reflecting the Rising American Electorate.20 Tipped work is also the economic center of many families; WORKFORCE 32 percent of tipped workers are parents, 37 percent of women are mothers, and nearly half of these *43 states with a are single moms.21 Women make up sixty six percent of the total tipped workforce, and over seventy subminimum wage percent of servers.22 The tipped minimum wage puts women in the compromising position of having to please employers and guests, as their livelihood depends on their capacity to earn tips. It is not surprising that the ac- commodation and food services industry, which includes the vast majority of tipped workers, is the largest source of EEOC sexual harassment claims.23 While these workers are seven percent of the total working population, they account for 14 percent of sexual harassment complaints.24 1 In the seven states, employing 1,167,820 tipped workers, where all workers earn a full minimum wage directly from their employer independent of tips, the poverty rate amongst tipped workers has been re- duced by 20 percent and food stamp usage by 21 percent, and sexual harassment has been cut in half.25,26 This report finds that across the country tipped workers benefit when they receive one fair wage, as this guaranteed base pay eases workers’ economic vulnerability and instability, directly leads to higher wages for workers at nearly every income decile, and is positively correlated with restaurant sales and employment per capita, and with no discernable effect on tipping patterns, as illustrated by the seven one fair wage (OFW) states.
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