Expanding drive to raise waiter salaries puts fear on the table in some restaurants

A food fight is brewing that could take a big bite out of restaurant waiters, customers and owners.

A nationwide effort to increase the minimum wage in the U.S. is attaching itself to the restaurant business, where waiters have long earned less than the minimum but usually more than made up for it in tips.

The effort wouldn’t necessarily end tipping, but it could decrease tips if customers knew waiters were getting a higher wage. Meantime, small business owners who run restaurants may have to eat the massive payroll hike by cutting staff – or closing.

The Restaurant Opportunities Centers United, with branches in ten cities, is steering the effort to ensure that when the minimum wage goes up, tipped restaurant servers are included. Seven states – California, Oregon, Washington, Alaska, Nevada, Montana, and Minnesota – have adopted the concept. In Maine, voters raised waiters’ minimum wage but then the legislature reversed it – under pressure from servers as well as owners.

The latest front in this battle is in Washington, DC, where a June 19 referendum will be held on Initiative 77, which would gradually raise the tipped wage from $3.33 to $15 per hour minimum by 2025. That would replace the current system, under which employers are supposed to compensate waiters up to the minimum wage if they don’t make it in tips. Initiative 77, proponents believe, provides a needed guarantee.

Diana Ramirez, the D.C. contact for ROC, did not respond to requests for an interview. But at a recent meeting in Washington, she said her group was going after “the system” that has “allowed a subminimum wage to disproportionately affect people of color and women.” She added, “This is the single largest source of sexual harassment in the industry,” suggesting that women put up with harassment so as not to lose a tip.

Nasirul Islam, a waiter for 33 years at historic Martin's Tavern, a medium-sized restaurant and bar in Washington’s Georgetown neighborhood that opened in 1933, says the issue is one of simple fairness for those who work hard. Islam, an immigrant from Bangladesh, says he can’t sleep at night out of fear Initiative 77 might pass.

Martin's is a moderately priced restaurant by DC standards, but Islam hustles and is able to average about $50 an hour in tips alone. He is deathly afraid that customers will tip less knowing he is making a higher base salary, and that Martin's will be forced to add a service charge to customer’s checks to stay in business, further reducing tips.

Islam says that with the incentive of a tip gone, the quality of service will decline, and those who don’t put in the effort or who just started in the business will nevertheless make as much as he does. The United States is supposed to be a market economy that rewards good work, he says. “You come here to work hard, for a better life, for a better life for your kids,” he added. “I could have gone to Russia or China. I came here.”

Billy Martin, whose family has owned Martin's Tavern for three generations, said he didn’t know exactly how he would make up for lost revenues, but that he could only raise prices on food items so much. “Nobody’s going to come in and pay $25 for a piece of meatloaf,” he said.

The effort wouldn’t necessarily end tipping, but it could decrease tips if customers knew waiters were getting a higher wage. Meantime, small business owners who run restaurants may have to eat the massive payroll hike by cutting staff – or closing.

Martin said he might have to cut employees or slap a service charge on checks, or both. What’s more, he noted, once employees in the back of the house – line cooks, dishwashers, and others – noticed that waiters were making almost as much as they were plus getting some tips, they could demand higher wages too.

Some studies suggest big problems for both businesses and employees. A March 2016 U.S. Census bureau study found that hiring of servers by employers increases until the minimum wage hits $4.50 per hour, but then levels out and begins declining with further minimum wage increases.

A March 2018 Harvard Business School study found that just a one dollar increase in the minimum wage leads to a 14-percent increase in the likelihood that a restaurant with an average rating on Yelp will close.

The authors calculated that, because a third of a restaurant’s expenses are spent on payroll, a ten percent increase in the minimum wage will cause profits to decline by two percent. The average profit margin of a restaurant is from two to five percent.

Keith Koffler is a freelance writer and the publisher of White House Dossier.