With Mayor Ed Murray expecting a recommendation on a minimum wage ordinance by the end of the month, members of his Income Inequality Advisory Committee are now negotiating in earnest. Nothing is set in stone, but the political realists on the committee realize that the proposal Murray ultimately submits to the city council will be for a $15 an hour minimum wage—if in name only. The proposal will also include some sort of multi-year phase-in, at least for “small” businesses; that’s a concession council member Kshama Sawant has already made from her initial “$15 Now” position. Also, expect to see tougher enforcement of wage and tip theft attached to the proposal.
Of course, details! But apart from the main points above, the debate has mostly shifted toward the definition of the word “wage.” Many on the business side of the table are arguing for a so-called “total compensation” minimum wage that would count both tips and the cost of providing benefits towards the employer’s $15 an hour obligation. As I’ve previously explained, that’s bullshit. Total compensation would mean a minimum wage worker earning $3 an hour in “benefits” (however those are defined and valued—again details!) would only take home $12 an hour in cash take-home pay. That’s not $15 hour! And that alone should make “total compensation” a nonstarter for anybody (or any mayor) who seriously claims to support raising the minimum wage to $15.
If we were talking about, say, an $18 total compensation minimum wage, that would be different. But we’re not.
(Also, because the cost of providing health care benefits inflates at a rate many times the Consumer Price Index, a total compensation model would erode the real value of an inflation-indexed minimum wage over time, as health care benefits gradually consumed a larger and larger share of total compensation. Honestly, read my analysis. The numbers are all there.)
Because of these obvious political and policy flaws, I am convinced that some on the committee are proposing total compensation as a mere negotiating tactic (you know who you are), intended to make way for a classic “tip credit.” (Opponents call it a “tip penalty.” What it really is, is a “tip deduction,” but we’ll use “credit” here for the sake of avoiding confusion.) A tip credit would permit employers to deduct from their minimum wage obligation the employee’s tips, up to the difference between Seattle’s minimum wage and the effective minimum wage for tipped employees under state and federal law—currently the Washington State minimum wage of $9.32 an hour.
To be fair, assuming no wage or tip theft, a tip credit would guarantee $15 in cash compensation. So there’s that. And on the vast majority of minimum workers who earn little to nothing in tips, a tip credit would have little to no impact. Considering where we were when striking fast food workers first started making the demand for $15 an hour, a $15 minimum wage with or without a tip credit would be a remarkable accomplishment.
So then why are the folks on the workers’ side of the table so adamantly opposed?
Because precedent!
Washington is one of only seven states without a tip credit, a distinction our restaurant industry and its Republican surrogates have relentlessly attempted to “fix.” Throughout much of the rest of the nation, the minimum wage for tipped employees is only $2.13 an hour, an absurdly low figure that inflicts poverty and abusive work conditions on a disproportionately female and minority workforce (70 percent of tipped workers are women!), while providing near-free labor to many restaurateurs. Wage and tip theft is rampant, and tip-dependent workers are forced to put up with all sorts of humiliation (and even outright assault) in order to secure the best shifts, and earn the highest tips.
Yes, the problem is with our tipped culture as much as it is with the tip credit, but a tip credit only makes things worse. Since the first $5.68 an hour of a worker’s tips would go straight into the employer’s pocket (as a deduction from their $15 obligation), any employee earning less than $5.68 an hour in tips (and most tipped employees do) would cost more to employ. Thus there would be even more pressure on a waitress to unbutton another button on her blouse in order to lower her employer’s labor costs.
I’ve got a daughter. Do I really want her being forced to show a little extra cleavage in order to keep her job, let alone up her hourly take-home pay? No.
So while $15 an hour with a tip credit would be a helluva lot better for most minimum wage workers than $9.32 an hour without, worker advocates and labor representatives simply don’t want to set the precedent that tip credit is an appropriate policy. They rightly fear giving state Republicans and squishy pro-business Democrats the ammunition to impose a tip credit statewide—a policy that would lower the income of Washington’s tipped workers everywhere outside of Seattle. That’s simply unacceptable. And they are also looking to set a good example for the cities and states that will inevitably attempt to follow in Seattle’s $15 an hour footsteps.
A tip credit is bad policy. It incentivizes wage and tip theft (an incentive I will illustrate in a subsequent post). It deceives consumers (who have no means of knowing if their tips are increasing the incomes of servers, or just decreasing the labor costs of employers). It helps perpetuate an unjust and abusive system. It is a totally arbitrary policy created in 1966 to buy off the National Restaurant Association (“the other NRA”) from opposing a federal minimum wage hike. And that is exactly what the Washington Restaurant Association and its surrogates are attempting today.
All that said, there may be room for a little compromise. But I’ll save that discussion for another post.
Another wage-game is the way employers have implemented over the past several decades the ‘equal pay for equal work’ concept. It would appear that women’s compensation is gradually becoming the same as men’s, but the men’s compensation has been stalled as women’s wages gradually approach men’s wages — thus resulting in ‘equality’.
any employee earning less than $5.68 an hour in tips (and most tipped employees do)
http://www.acc.umu.se/~ericj/j.....needed.png
Citation Needed
You’re afraid to do what’s right for Seattle because you fear what the rest of the state might do, but are saying to vote for Prop 1 because it’s good for Seattle right now ?
Another finger-wagging rich Republican woman tells working women to shut up and be grateful for their 77 cents on the dollar.
http://www.huffingtonpost.com/.....11730.html
Roger Rabbit Commentary: Waitresses who live on tip income made poor choices. They should have married for money and become stay-at-home soccer moms, like respectable Republican women do! Wage theft and tip credit are lifestyle choices, not genuine issues. And “bizarre obsessions” of the so-shu-lists.
@ 1
You don’t give consideration to the ‘stalling’ of wages because of efficiency gains in commerce? I agree that the gender compensation gap is closing on its own, over time, as the old guard men at the top retire and are replaced by a more equal gender mix of up-and-comers, but an employer taking advantage of requiring fewer workers and holding down wages because the market enables that to occur is a ‘game’? Not a predictable result of Moore’s Law and a few decades for that law to be in effect?
So they are arguing that wait staff should not get an increase, unless there tips are lousy, because…crickets.
I worked for a restaurant with a UNION contract in Illinois around 1980. We got more than the minimum wage and kept our tips. The owners had several restaurants, all were busy and tips were great.
@4 more likely a unemployment level that is still so high.
From the Federal Reserve Bank of Atlanta’s 2013 annual report…
When the elite talk about inflation being bad, they mean wage increases.
@6
OK, then. Let’s say THAT’s the reason – market forces in a poorly performing economy, rather than efficiency gains attributed to technological advancement. That’s still not a ‘game’ as stated by ms. lucy.
My point was that employers are doing what they do at this phase of an economic cycle – they employ only the number they need and they look to limit labor costs. That’s not sleight-of-hand or gamesmanship. That’s Econ 101.
It’s still a game. Business is a game, you win and make a lot of money, or lose and don’t.
Employers are playing the game and making winning moves. Unfortunately some of those moves hurt the labor force, and the economy as a whole.
It’s up to government to set the rules of the game such that businesses don’t hurt the laborers too badly.
re 4: “You don’t give consideration to the ‘stalling’ of wages because of efficiency gains in commerce?”
Why should I make your argument for you? Taken in whole, your response to my comment is an obfuscation.
So tip credit will make your daughters pander with their sexuality (stripper) by having to show more cleavage. Gimme a break, hack writing, hyperbole much? Maybe it is more incumbent for a parent to teach their daughter more self respect.
Here is what the tip credit does.
A customer gives an employee a $5.00 tip and his employer is able to reduce the employee’s hourly wages by $5.00. What results is, the customer’s tip goes into the employers pocket instead of the employee’s pocket. The tip credit is a law that allows employers to steal the customer’s tip via deductions from the employee’s paycheck. It shouldn’t even be legal.
Have you as a tipping consumer consented to your government giving over your tips to business owners? That’s what they are doing when they enact tip credits. Without consumer consent, it seems like fraud to me.
@11,
a responsible employer won’t bring on an employee without knowing that the marginal revenue generated by that employee is sufficient to pay the wage and they’ll know that employee has work to do.
Currently the employer of a tipped profession employee in a tip credit state knows that they’ll have to pay, at minimum, the tipped employee wage (say $4/hr) but potentially double that wage if that employee doesn’t have enough work to generate tip income. It causes the employer to want to hire the right number of people to balance between their out of pocket costs and the level of service in the establishment.
In a non-tip-credit state, there’s more costly direct incentives for the employer to minimize the number of employees working, and it shows in that the average WA restaurant has 3 fewer employees than national average.