A bill moving through Congress could raise operating costs for local restaurateurs who would be required to nearly double their base pay for waitresses, bartenders and other tipped workers by the end of the decade.
Senate Bill 1737 would raise the federal minimum wage for tipped workers from $2.13 an hour to $5.93 by 2015 and $7.10 by 2019. In Ohio, the tipped minimum is already higher than the federal rate at $3.98 an hour, but the proposed increase would still amount to a 75 percent wage hike over time.
Under the law, tipped workers can be paid less than the regular hourly minimum — $7.95 in Ohio and $7.25 federally — as long as their employer makes up the difference. But while the minimum wage is reflected in every paycheck, tips can vary dramatically and make it difficult for tipped workers to keep up with the rising costs of basic necessities.
“Tips are unreliable,” said Emily Mendenhall, who manges Lily’s Bistro in Dayton’s Oregon District and previously worked as a server and bartender in Chicago and New Orleans. “There would be days that I would make only $8 in tips in a whole shift, plus my $2.13 paycheck. Inevitably, that would be the day that rent was due.”
Mendenhall, who worked in mostly upscale restaurants, acknowledges that average hourly wages for wait staff and bartenders are typically significantly above minimum wage. In fact, the median hourly wage nationally for tipped employees is $16 to $22 an hour, according to the U.S. Bureau of Labor Statistics.
The problem is the sporadic and often seasonal nature of the restaurant business, which means paychecks don’t always keep up with the average, Mendenhall said: “A lot of people in the service industry really do live hand-to-mouth, and having unreliable tips hurts sometimes, that’s for sure.”
Women with backgrounds similar to Mendenhall’s are likely to suffer most, according to a recent report from the White House.
Women account for 72 percent of all workers in predominantly tipped occupations, and wages for those workers are nearly 40 percent lower than overall average hourly wages, according to the report. Meanwhile, tipped workers are twice as likely as other workers to experience poverty — and servers are almost three times as likely to be in poverty.
While Mendenhall remains a staunch supporter of an increase in the tipped minimum, her new management role has given her greater insight into the financial concerns of business operators who employ tipped workers.
“There’s a formula that goes into everything,” Mehdenhall said. “There’s a cost of goods, there’s a cost of labor, there’s paying your rent and utilities. And then there’s a slim little area there that’s profit. Increasing base pay over time would give some reliability and stability to a job that is frequently unreliable and unstable, but we would have to pass on some of the labor cost; that would be part of it.”
Restaurant owners in Ohio would face a smaller wage hike than restaurants in states adhering to the federal rate, which hasn’t changed in more than 20 years.
But even a small increase would make a big difference in operating costs, according to Dan Young, owner of Young’s Jersey Dairy in Yellow Springs.
“A busy restaurant will typically generate about 20,000 server hours a year,” Young said. “A $2 an hour increase would be $40,000. You have to try to squeeze those costs out somewhere.”
Young said the most likely recourse for most restaurant operators would be a combination of raising prices and cutting staff and hours. But tipped workers will continue to be the backbone of the restaurant industry, he said.
“I don’t want to come across as saying it’s all doom and gloom, and everybody is going to go out of business; that’s not what I’m saying,” Young said. “And I’m certainly not anti-server, for heaven’s sake. We exist because of our 320 employees who do a great job for us. But there are real consequences associated with any change like this.”
The Senate may vote on the bill, which includes President Obama’s proposal to increase the federal minimum wage from $7.25 to $10.10 an hour, as early as next week. But even if it passes the Senate, the proposal is likely to face stiff opposition in the Republican-controlled House.
The National Council of Chain Restaurants (NCCR) is among a number of restaurant associations leading the charge to kill the bill.
“We’re just trying to make sure that federal policy doesn’t create a disincentive for hiring and growth within the industry,” said NCCR Executive Director Robert Green. “At this key juncture in the country’s economic recovery, the last thing that the Senate should be considering is a scheme to raise labor costs.”