When I offered last week my “Five Proposals for Making a ‘Tip Credit’ Less Worse,” I got exactly the sort of response from the business community that I expected: crickets. The restaurant industry really isn’t interested in discussing the pros and cons of the traditional tip credit; they just want it, period. So there wasn’t much risk in proposing compromises that the other side would refuse to consider.
Which is why I have one more tip credit compromise to propose—one which borrows from the arguments made in support of the bullshit “total compensation” proposal—that offers cost savings to employers while removing their incentive to push workers to part-time employment. For want of a better term I dub it: a “Tip Adjusted Benefit Deduction (or TAB Deduction).”
A TAB Deduction is a variation on the traditional tip credit that further limits the credit to an amount not to exceed the cost of providing certain defined benefits. A TAB Deduction would assure that all Seattle workers take home a minimum of $15 an hour in cash compensation, while incentivizing employers to shift involuntary part-time tipped workers to full-time jobs. A TAB Deduction would also be conditional on meeting strict business and accounting practices intended to impede wage and tip theft, while facilitating the investigation and prosecution of claims thereof.
How does the TAB Deduction work?
A qualified employer would be permitted to deduct from its minimum wage obligation an amount equal to the smaller of A) the cost of providing permissible benefits, B) the amount of tips actually received by the employee, or C) the difference between Seattle’s minimum wage and the effective minimum wage for tipped employees under city, state, and federal law.
For example, assume the minimum wage for tipped employees is WA state’s current minimum wage of $9.32/hr, while Seattle’s minimum wage is $15/hr—that makes the maximum TAB Deduction $5.68/hr. Now assume that an employee earns $4/hr in tips and $3/hr in benefits. The employer may deduct the smaller of the three figures—$3/hr—from its minimum wage obligation, with the employee ultimately receiving $12/hr in wages plus $4/hr in tips for a total of $16/hr plus benefits.
Only those benefits defined in ordinance, and in maximum amounts approved by regulators, may be applied to the TAB Deduction. Further, the TAB Deduction would only be made available to employers who follow strict business and accounting practices.
How does a TAB Deduction benefit workers?
While it would guarantee all workers a minimum cash compensation of $15/hr, a TAB Deduction would also modestly reduce take-home pay below what a straight up $15/hr minimum wage might otherwise provide to tipped employees who receive benefits. But the TAB Deduction does broadly benefit labor in two distinct ways:
First, a TAB Deduction removes from employers existing economic incentives to eliminate benefits, or to force workers into part-time work in an effort to cut costs by denying them benefits. In any workplace where average tips routinely exceed the cost of benefits, the labor-cost differential between part-time and full-time work is all but eliminated.
Second, the TAB Deduction addresses our epidemic of wage and tip theft by forcing employers to adhere to strict business and accounting practices (defined in ordinance and approved by regulators) in order to qualify. The TAB Deduction thus serves as a carrot for enticing employers into imposing stricter business practices upon themselves.
How does a TAB Deduction benefit employers?
It saves them money, duh, by permitting qualified employers to deduct the cost of providing benefits from their minimum wage obligation, up to the maximum allowable tip credit.
Conclusion:
Again, my preference would be for a straight-up $15 minimum wage, no tip credit (and certainly no “total compensation,” a proposal that only achieves $15 by totally redefining the meaning of the word “wage”). But if we’re going to talk about compromise, the least we can do is talk about these compromises creatively.
There’s more at stake here than simply the wages of Seattle workers. If we pass a $15 minimum wage, the rest of the state and the nation will look to us as an example. So in a nation where a tip “credit” is already deducted from the incomes of most tipped employees, anything we do to set a precedent for a better tip credit could end up improving the lives of millions of minimum wage workers. Likewise, anything we do to undermine Washington’s position as one of only seven states without a tip credit (or even worse, to set precedent for “total compensation”) could have a dramatically negative impact far outside Seattle’s borders.
That said, I don’t believe that many on the pro-business side of the table are negotiating in good faith, and I don’t believe that they are truly interested in debating compromise. But they are welcome to prove me wrong.
Did you make your proposal in any type of forum frequented by business community types? Or just here, where the vast majority of the commenters already agree with you? Considered an op-ed in the PSBJ or similar?
And while you’re busy worrying about what a couple of bad economic quarters might do to sales tax revenues feeding Metro:
http://horsesass.org/seattle-t.....vertently/
do you wonder what a couple of bad economic quarters might do to the employers of people whose salaries you want to see immediately raised so much?
After all, Robert Reich told us in that video posted here last week that the cost of raising wages would be borne by the employers.
@1 I’m not a serious enough person to be invited to the table on the mayor’s committee, but yes, I’ve been privately pitching this ideas.
So you’re suggesting that we can’t attempt a living wage in Seattle because local businesses might suffer a couple bad quarters? Workers suffer from economic swings all the time, and well, those are the breaks. But business owners need special protections?
@1 In my experience, business owners live much better than the rest of us, so go cry your crocodile tears somewhere else, because I’m not impressed.
@2
I’m fine with your response if you’re fine with critics of Metro discounting Metro’s stated concerns, reliably repeated above, about the possibility that their sales tax revenue subsidy might similarly decline in the future for a temporary period.
And I think that business owners are deserving of a special protection from a sudden dramatic increase in their labor costs the same way you feel that Metro is deserving of a special, taxpayer-funded protection from a sudden substantial decline in their subsidy.
Tried that Ethiopian restaurant
Altaye Ethiopian Restaurant
8135 Rainier Ave S, Seattle, WA 98118
(206) 353-5157
you mentioned a month or so ago. Very, very good. Thanks for the tip.
re 1:If you have considered all of the above, why not just share your findings and sources, or just admit that you have an anti-labor bias and that you would make the same statements that you do even if you had evidence to the contrary?
On the one hand, people of your type (conservative) generally favor the hiring of undocumented, cheap labor and at the same time stir fears of the ‘illegal’ hordes of Mexicans crossing the borders. You are a hypocrite and it is patently obvious from whence your trenchant little questions come from.
@ 3
Why, yes, placing capital at risk, working longer hours, and doing without some of the employer-paid benefits that are being given to one’s staff does, over time, typically have a reward.
Sometimes it’s known as higher taxation.
@5
…share your findings and sources…
Er, I think I did. Twice, in the spew you referenced.
Question for you: How much more does it cost to pay $15.00 per hour to an undocumented employee than it does to pay $15.00 per hour to a US citizen or a documented immigrant?
Goldy-I own two restaurants with 34 employees between them, and I like the TAB idea. The only people who make less than $15 are FOH staff (who make $25-35/hr with tips), brand new hires for the 1st 3 months of employment, & dishwashers. Any BOH staff that prove to be dependable get raises at 3 & 6 mos. So it would be not too dramatic of an increase to give new hires a little more and dishwashers a little more also. In addition I would give the chefs already making $15 a bump since it wouldn’t be fair that new hires & dishwashers are paid the same. I would however eliminate some dishwasher shifts and expect a little more out of my tenured employees who got the bump up to $17-18/hr., it would cost 2 dishwasher jobs of the 34 employees I currently have. I am not paying a dishwasher $15/hr to stand around on a slow night, restaurant margins aren’t so large they can waste labor. I can buy some extra dishes and the chefs can do dishes, with the extra dishes assuring we dont run out of clean plates/flatware if we get busy on an off night. There would also be a small price increase, but not so large I would expect too many complaints.
Oklahoma is going the opposite direction. The retrograde Republicans who run that state just enacted a law that prohibits Oklahoma cities from raising the minimum wage.
http://www.dailykos.com/story/.....tail=email
@6 In case this is news to you, hourly workers also place capital at risk (to pay for education, buy a car to get to work, etc.), work long hours, etc., and don’t enjoy nearly the rewards that business owners do.
Don’t delude yourself into thinking that business owners possess magical skills or attributes that entitle them to a vastly greater slice of the economic pie than anyone else gets. None of them would have a damn thing without the sweat and efforts of their workers.
@7 You want us to believe that an employer who would illegally hire an undocumented worker will pay that worker the legal minimum wage?
@8 Please make your case to the Dave Meinert crowd. They obviously don’t take such proposals seriously when coming from me.
Well, waddya know, another empirical study refutes the theory that claims raising the minimum wage will destroy jobs.
http://seekingalpha.com/articl.....wage?ifp=0
re 13– Never-the-less, Trout-Boy Bickle will repeat the same nonsense anew in another thread as if the world were just recreated and the same ground would have to be covered again to refute his idiocy. He’s either an idiot or being paid by the word to spread an erroneous viewpoint.
@14 Probably Koch money at work.
@13, yawn, another Card/Kreuger vs Neumark debate ? You want to believe the study that relied on surveyors and grad students calling fast food restaurants instead of the ones based on data from the feds ?
http://www.npr.org/blogs/money.....-kill-jobs
http://www.epionline.org/studi.....1-2013.pdf
re 16 — So, you’re saying the government is a reliable source? Runs a little counter to your usual blather — but then again, why let consistency ruin your ridiculous party line?
Yawn, indeed….
@ 16 @ 17
I’m not sure that both the Card/Krueger and CBO can’t be correct.
The former looked at a specific industry – low-end fast food – and made a conclusion based on that. The latter looked at the across-the-board effect of a nationwide increase.
Where’s the disconnect?
I followed the NPR link to the CBO report
http://www.cbo.gov/publication/44995
and found this:
In addition to affecting employment and family income, increasing the federal minimum wage would affect the federal budget directly by increasing the wages that the federal government paid to a small number of hourly employees and indirectly by boosting the prices of some goods and services purchased by the government. Most of those costs would need to be covered by discretionary appropriations, which are capped through 2021 under current law.
Federal spending and taxes would also be indirectly affected by the increases in real income for some people and the reduction in real income for others. As a group, workers with increased earnings would pay more in taxes and receive less in federal benefits of certain types than they would have otherwise. However, people who became jobless because of the minimum-wage increase, business owners, and consumers facing higher prices would see a reduction in real income and would collectively pay less in taxes and receive more in federal benefits than they would have otherwise. CBO concludes that the net effect on the federal budget of raising the minimum wage would probably be a small decrease in budget deficits for several years but a small increase in budget deficits thereafter.
If a wage increase is supposed to be a net good thing for the country, shouldn’t it end up costing us less over time? CBO doesn’t agree that it will.
Raising minimum wage levels might make a difference at the bottom quintile level. But if, as Reich maintains, it’s paid for by the employer, then that employer earns less and pays less tax. That’s less revenue flowing into the government and less money available for social services.
So, perhaps while 500,000 people are being thrown out of work, there’s also less money long-term to support them through social services.
Maybe be careful what you wish for.
re 18: “…there’s also less money long-term to support them through social services.”
I’m not agreeing with your preposterous conclusions, BUT, isn’t this a result that you usually endorse? In addition, people who make more money will be able to purchase their own health insurance, thereby making the working poor less of a drain on our tax money as we will not be subsidizing, for instance, each and every WalMart ‘Associate’ to the tune of $2,000 per year.
http://www.bloomberg.com/news/.....ueens.html
About 685,000 results (0.37 seconds)
@ 19
My preference would be to see a better economy and more Federal tax revenue as a result of that. Ergo, more revenue flowing in and less need for social service support because fewer are in need, and a declining deficit as a result.
Regarding your second statement, I think the overall effect is what the CBO looked at, and they saw a slight initial boost followed by a longer-term decline, as I supported with text and link, since you requested elsewhere that I show my work.
So I think my response is that your proposed benefits from a wage increase, according to the CBO, do not translate into a longer-term benefit to the economy as a whole.
As far as purchasing their own health insurance, I’m pretty sure that for someone earning at $15.00 an hour there still is a substantial government subsidy, and that subsidy isn’t much more than at, say, $10.00 an hour. So that would seem to be a rather preposterous conclusion on your part, no?
re 20: “My preference would be to see a better economy and more Federal tax revenue as a result of that.”
Ever hear of Keynesian economics? I really don’t care what you would like or prefer; I just want to use what actually works.
“As far as purchasing their own health insurance, I’m pretty sure that for someone earning at $15.00 an hour there still is a substantial government subsidy, and that subsidy isn’t much more than at, say, $10.00 an hour. So that would seem to be a rather preposterous conclusion on your part, no?”
Would that government subsidy be as generous to the worker as, say, an oil depletion allowance would be to Exxon-Mobil?
@22
Don’t know that it might be as generous. Do know that it’s irrelevant to the thread topic.
Government subsidies and the cost thereof is a subject you brought up yourself in #20. But now it’s irrelevant?
@ 25
Well, if we’re going to widen the thread topic to include a discussion of all government subsidies because I brought up the fact that health insurance is subsidized for a lot of lower-wage employees and that the amount of the subsidy won’t change if their wages get bumped up from the $20k range to $30k range, why don’t we just include a discussion of the federal government’s subsidy to Planned Parenthood? Does that advance the thread topic any, or would that devolve it into an unfocused mush?
Nice try. You claimed to argue like a wolverine. You’re arguing like a wolverine with ADD.
@ 25
“…the amount of the subsidy won’t change very much…”
Sorry.