There are lot of good reasons to oppose a “tip credit”, but one that isn’t often discussed is the way it incentivizes bad behavior on the part of unscrupulous employers by magnifying the rewards of wage theft. The math is subtle, but simple.
Let’s say you earn $27 in tips over the course of a nine hour shift. Under a straight up $15 minimum wage, you’d earn $15 an hour in wages plus $3 an hour in tips for a total cash compensation of $18 an hour. That’s $162 in tips and wages over a nine-hour shift.
But under a tip credit, that same shift would earn you only $135: $12 an hour in wages, plus $3 an hour in tips, for a total of $15 an hour. If your tips per hour are smaller than the maximum tip credit, all of your tips go toward your employer’s tip credit. You know—in his pocket. Whether you earn a dollar or two an hour more in tips or a dollar or two less, it makes no difference on your paycheck—all it does is raise or lower your employer’s labor cost by an equal amount. And that’s where the wage theft incentive comes in.
For example, let’s say your employer cheats you out of an hour, forcing you to clock out after only 8 hours or recording only 8 hours on your pay stub. Well, of course you lose an hour of pay, so your paycheck goes down $15 to $120. But your employer, who would have paid you $12 an hour over the course of a 9-hour shift, now gets to spread your $27 in tip credit out over fewer hours. $27 divided by 8 equals about $3.38 an hour in tip credit. So rather than paying you $12 an hour for 9 hours of work, your employer now only pays you $11.62 an hour for 8 hours of work. Such a bargain!
Of course, not all employers cheat like this. I’m guessing most don’t. But some do. And as the free marketeers will tell you, if you incentivize bad behavior, you’re likely to get more of it.
It also disincentivizes customers from tipping. Here’s how: If I tip a server, I expect the server to get my tip. If I know the house is taking it, I won’t tip, because I’ve already paid the house.
P.S.: I know the $15 minimum wage disincentives some customers from tipping, too, i.e. those who have told us they won’t tip if servers get a raise to $15 an hour, but I’m not counting those cheapskates.
I wonder if Stefan left a tip for that single-mom waitress he got fired for shushing his rowdy kid in a public restaurant? You remember Stefan, the guy who collected $225,000 from King County taxpayers because he asked for 650,000 documents under the Public Records Act and got only 649,994 of them? My guess is he probably doesn’t tip and never did.
I think the conservative response is going to be something like: “Yeah, but, blah, blah, blah, blah, blah, blah…”
If your hourly tips aren’t at least $6 per hour to make up the difference between 9.32 and 15 you Should look for a new place to work. Your employer is likely to be closing the doors soon. Fun fact for you food cost is usually only 35% or so of the price and your server gets at least 9.32 an hour of that already Roger .
@4 Judging from the number of restaurants keeping their doors open in Seattle and other cities, the economics work just fine — at least for the employers.
I’m pretty sure a much larger monetary amount of “wage theft” would occur when restaurants switch to a service fee that can then be proportionately divided and legally shared with the kitchen staff and more traditionally non-tipped workers. As a service fee, it doesn’t even have the legal protections afforded by tip pools.
http://wiserwaitress.com/the-menu/the-tip-system/