Initiative 77 Is a Vital Measure for D.C.’s Almost 30,000 Tipped Workers

by Staff Attorney Leo Gertner

On June 19, 2018, District of Columbia voters will choose whether to eliminate the separate minimum wage for all tipped workers and bring it up to a living wage over eight years. Non-tipped workers in D.C. currently earn $3.33 an hour (with tips intended to make up the difference to the full minimum wage). If Initiative 77 passes, this base wage of $3.33 would gradually increase to $15 by July 2025.

Opposition to the initiative has raised unsubstantiated claims that eliminating tipped wages will harm consumers and lead to job loss. Because much of the opposition has been spearheaded by the powerful industry group Restaurant Association of Metropolitan Washington with support from celebrity restaurant owners and the National Restaurant Association, the public debate on Initiative 77 has focused on waiters and bartenders. However, this debate overlooks the nearly 60 percent of tipped employees in the District of Columbia who are not waiters or bartenders, including restaurant workers who assist servers and bartenders—such as hostesses, barbacks and busboys—as well as tipped workers outside the restaurant industry, including hair stylists, manicurists, cosmetologists, bellhops, hotel concierges, taxi drivers, delivery drivers, parking lot and garage attendants, and car wash workers. These tipped workers account for approximately 17,000 of the roughly 30,000 tipped workers in the District. Like most of their counterparts waiting tables and bartending in full service restaurants, they are some of the lowest paid in the District and most likely to live in poverty.

If passed, Initiative 77 would immediately raise the base wage for tipped workers to $4.50 in July and provide increases of $1.50 every year thereafter until reaching $15.00 in 2025.[1] By 2026, the wage for all workers would be $15.00 and indexed to increases in the consumer price index. (D.C. government employees or employees of D.C. government contractors would be exempted).

Not Just Waiters and Bartenders: A Raise for 29,000 Working People in Washington, D.C.

In 2016, the D.C. Council voted to raise its general minimum wage to $15.00 by July 2020, lifting the wages of approximately 114,000 D.C. workers (14 percent of the workforce).[2],[3] While a great victory against rising inequality, D.C.’s tipped workers were excluded from the increase, and the separate, substantially lower tipped wage remained the law. As a result, D.C. now has the largest gap between the tipped and full minimum wages in the country.[4] Approximately 29,000 workers in the city are paid in tips, receiving only $3.33 an hour in base pay from their employers. Approximately 40 percent of these are waiters and bartenders who work in D.C.’s highly visible and profitable restaurant industry, which has led a fierce campaign to discredit the proven benefits of a single fair wage for all workers. However, nearly 60 percent of tipped workers are not servers and bartenders—they work in other jobs in the restaurant industry and are spread out over various other industries also vital to the District’s thriving economy. These workers do not earn a lot in tips—indeed, oftentimes consumers do not even realize that they are subject to this lower tipped wage rate.

D.C.’s regulations provide a list of tipped employees that reaches far beyond the restaurant industry: “waiters, waitresses, counter personnel who serve customers, bus persons, server helpers, service bartenders, car wash attendants, parking lot attendants, parking garage attendants, bootblacks, hotel doorkeepers, bellhops, hat checkers, cosmetologists, manicurists, pedicurists, shampooers and aestheticians.”[5] Out of the 17,000 tipped workers not in the restaurant industry, car wash workers represent about 500, personal care workers (like hairdressers, shampooers, and manicurists) alone number at least 1,000 in the city, hotel concierges and baggage porters around 1,500, and parking lot attendants almost 2,500.[6] Many workers in the gig economy who work for tips may also not be accounted for in official estimates.

All tipped workers play an important role in making D.C. a vibrant city and tourist destination, providing crucial personal care, accommodation, and transportation services. And yet, like restaurant workers, they struggle to pay the rent and feed their families with unstable and meager incomes. For example, median wages for parking lot attendants in D.C. are $12.11 an hour and for baggage porters, $12.58. To put these wages into perspective, D.C.’s workforce as a whole earns an average of $33.82 an hour. Without increases, tipped workers will be left behind. These workers deserve a share of the prosperity they help create for D.C.’s thriving economy.

Tipped Workers in All Industries Experience Higher Rates of Poverty

As a result of low pay and the precariousness of tipped occupations, tipped workers are twice as likely to live in poverty as other workers. According to analysis by the University of California and the Economic Policy Institute, while the poverty rate for non-tipped workers in the U.S. was 6.5 percent during the period analyzed (2010–2012), the poverty rate of tipped workers was 12.8 percent.[7] Restaurant servers and bartenders, who comprise the largest share of all tipped workers, had an even higher poverty rate of 14.9 percent.[8] And it’s not just individual workers who suffer, but entire communities, as women and people of color make up the vast majority of tipped workers. Black workers are frequently tipped less than their counterparts as a result of discrimination.[9]

In states with a tip credit system, poverty among tipped workers is more prevalent. According to data from 2010-2012, while the poverty rate for non-tipped workers ranged from 6.0 to 7.0 percent in states with a tipped subminimum wage, for tipped workers the poverty rate jumped to more than twice that rate—between 12.5 and 14.5 percent. Poverty among servers and bartenders in those states was even more alarming: 18.0 percent in states that follow the federal tipped rate of $2.13, and 14.4 percent in states with tipped subminimum wages between the federal tipped floor and the full minimum wage. This means that in states with a tip credit, tipped workers are more than twice as likely to live in poverty. In comparison, the poverty rates for tipped and non-tipped workers in One Fair Wage (equal treatment) states, while still in need of improvement, did not diverge as greatly from one another.

Tipped workers not only experience higher rates of poverty, but must also contend with unpredictable incomes and schedules. Due to the dual pressure of low or precarious pay and high costs of living, nearly half of all tipped workers in the U.S. are forced to rely on public benefits. According to research by the University of Berkeley and the Economic Policy Institute, nationwide, around 46 percent of tipped workers and their families rely on public programs—a significantly higher share than the 35.5 percent of non-tipped workers and their families who also rely on these programs.[10]

The Tipped Subminimum Wage System is Difficult to Monitor and Enforce

If an employee does not earn enough in tips to make up the gap with the general minimum wage, by law employers must pay the difference. Unfortunately, this does not always happen as employers sometimes simply refuse to pay or confiscate tips. An estimated 84 percent of full-service restaurants that the Department of Labor’s Wage and Hour Division investigated between 2010 and 2012 violated labor standards.[11] Laws around the tipped wage are often vague and hard to enforce, leaving many workers in the dark about their rights or in fear of retaliation if they speak up.[12] The Economic Policy Institute reports that tipped workers have lower take-home pay, greater gender pay disparities, and double the poverty rates of non-tipped workers, particularly in states with low tipped minimum wages.[13],[14]

Arguments Against Eliminating the Sub-Minimum Wage for Tipped Workers Don’t Hold Water

Opponents of eliminating the tipped minimum wage argue that prices for consumers will rise and tipped workers will lose their jobs as businesses suffer with higher labor costs. This has not been in the experience of Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington, where job growth has been comparable, if not higher, than in states with tipped minimum wages.[15],[16] Cities like Minneapolis and Flagstaff, that have also instituted higher minimum wages without tip carve-outs, have not proven the doomsayers’ arguments.[17] California, one of the country’s strongest economies, has had one wage across the board for decades. Workers simply earn more in One Fair Wage states and suffer less poverty.[18] As one small businessperson in D.C. put it, “I believe tipped workers should not have to rely on the kindness of their customers and bosses to make a livable wage.”[19] Equal treatment in wages is not just good policy, it is just—and an imperative for the District of Columbia.

Endnotes

[1] https://docs.wixstatic.com/ugd/17da72_0585683455f54672bcfa16582d757407.pdf

[2] https://www.washingtonpost.com/local/dc-politics/dc-gives-final-approval-to-15-minimum-wage/2016/06/21/920ae156-372f-11e6-8f7c-d4c723a2becb_story.html?utm_term=.4ed4c2aed18f

[3] https://www.epi.org/publication/raising-the-d-c-minimum-wage/

[4] https://fivethirtyeight.com/features/the-minimum-wage-movement-is-leaving-tipped-workers-behind/

[5] http://dcrules.elaws.us/dcmr/7-999

[6] NELP estimates based on May 2017 OES data (on file with NELP).

[7] Sylvia Allegretto and David Cooper, Twenty-Three Years and Still Waiting for Change, Economic Policy Institute and the Center on Wage and Employment Dynamics, Institute for Research on Labor and Employment, University of California-Berkeley, July 10, 2014, http://www.epi.org/files/2014/EPI-CWED-BP379.pdf.

[8] Ibid.

[9] https://onlinelibrary.wiley.com/doi/full/10.1111/j.1559-1816.2008.00338.x

[10] Ibid.

[11] https://www.epi.org/files/2014/EPI-CWED-BP379.pdf

[12] https://www.washingtonpost.com/news/posteverything/wp/2018/05/31/hey-d-c-reject-the-misleading-signs-and-raise-tipped-workers-wages/?utm_term=.fe03ec85d6ca

[13] https://www.epi.org/publication/employers-steal-billions-from-workers-paychecks-each-year-survey-data-show-millions-of-workers-are-paid-less-than-the-minimum-wage-at-significant-cost-to-taxpayers-and-state-economies/

[14] https://www.epi.org/publication/waiting-for-change-tipped-minimum-wage/

[15] http://stage.nelp.org/publication/st-paul-reject-lower-minimum-wage-tipped-workers/

[16] https://www.washingtonpost.com/news/posteverything/wp/2018/01/16/paying-tipped-workers-better-wouldnt-lead-to-fewer-restaurant-jobs/?utm_term=.e91a661a1c5e

[17] http://www.startribune.com/minneapolis-city-council-to-take-final-vote-on-15-minimum-wage-friday/431761843/#1

[18] https://fivethirtyeight.com/features/the-minimum-wage-movement-is-leaving-tipped-workers-behind/

[19] http://www.washingtonblade.com/2018/05/22/vote-yes-on-77-and-support-one-fair-wage/

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