ALBANY -- What would getting rid of the tip credit mean for the restaurant industry in New York?
That's a debate that is growing in New York after Gov. Andrew Cuomo in his State of the State address in January announced the state Labor Department will be holding hearings to look into the possibility of eliminating the tip credit in New York.
“These hearings are going to take place across the state,” said Melissa Fleischut, president and CEO of the state Restaurant Association.
“We’re hearing a lot of concern back from the employers and the employees that they think this could be very detrimental to the restaurant industry.”
Tip credits allow restaurants to pay tipped employees less than the minimum wage as long as their tips make up the difference. Depending where in New York a restaurant is located, the tipped wages for employees is $7.50 and hour for most of New York and $8 an hour in New York City.
If the tip credit was eliminated that would mean employers would have to pay tipped workers an additional $3.50 an hour in Westchester, $4 more per hour in New York City and $2.90 more per hour throughout the rest of the state.
That would bring the wage up to the current minimum wages, which range from $13 an hour in the city to $10.40 upstate.
Better or worse?
The debate is whether the same minimum wage for tipped workers as other workers would be beneficial to those in the service industry.
Some fear, for example, customers would be less inclined to leave tips, or cut back on the tips, if the higher minimum wage was installed.
“We are not asking for this,” said Joshua Chaisson, co-founder of the Restaurant Workers of America, a Maine-based group that wants to keep the tipped wage.
“The people who are pushing this sort of agenda often times don’t work in restaurants or don’t understand the macro economics of a restaurant to realize that we don’t need to be saved.”
There are more than six million tipped employees across the U.S., according to the Restaurant
Opportunities Centers United, a New York-based group that supports ending the tipped wage.
Restaurant workers make up about 81 percent of all tipped employees.
Why the change?
The issue with employees earning tips is some people say tipped employees are exploited, or more often willing to put up with being harassed from customers or employers in order to make tips.
Some states have done away with the tipped wage and switched to paying the state's minimum wage, calling One Fair Wage campaign.
There are seven states that use this type of system to pay their employees, Alaska, Montana, Nevada, Minnesota California, Oregon and Washington.
“In California, a women gets a full wage from her boss,” said Saru Jayaraman, president of the Restaurant Opportunities Centers United.
“She’s not 100 percent completely dependent on tips so she doesn’t tolerate the guy grabbing her butt in order to have any income to take home that night.”
In 2016, Maine passed a ballot measure that eliminated the tip credit and raised the hourly wage for tipped positions. According to the Restaurant Opportunities Centers United, it was the most voted for ballot ever in the state.
But the law didn't last long. Last year, another ballot measure changed it back to the tip credit because workers complained they were losing tips.
The New York Restaurant Association said that after the tip credit was eliminated in Maine, tipped workers saw their take home pay decrease by 20 percent.
But supporters of ending the tipped wage said the negative impact is being overstated.
“Lobbying groups have been trying to spread this mythology among workers, that their tips will go away if their wages go up and exactly the opposite is true,” Jayaraman said.
Will it help workers?
Another issue with tipped workers is the prevalence for exploitation and sexual harassment.
The restaurant and hospitality industries make up the largest source of sexual harassment charges filed by women through the Equal Employment Opportunity Commission, according to the Center for American Progress, a liberal think tank in Washington D.C.
Waitresses in New York told stories of being harassed by customers.
“I have all these things I say when I get a come on. I have to just make a joke about it and be nice and hope that these people that just hit on me are going to leave a tip so I can pay my bills,” said Nadine Morsch, a server at The Dutch Mill in Rochester who has advocated for the change in law.
Proponents for the so-called one fair wage system argue that if a portion of a person's wages is dependent on earning tips, then those employees may feel the need to put up with harassment from customers in order to make tips.
Or they may have to deal with harassment by management or supervisors in order to be scheduled during busier or better tipping times at their restaurant.
"There’s been times my paycheck has been $40, and I have to live on that for the week. If we’re being paid a livable fair wage then we can afford to go out to eat and support the industry and not put up with being sexually harassed on a regular basis,” Morsch said.
Increasing wages
In 2015, the tipped wage for New York increased by as much as 50 percent in some areas: The wage increased from $5.50 to $7.50 outside New York City.
In the city, the wage is $8 for small employers and $8.65 for large employers.
"At the end of day, this is a question of basic fairness. In New York, we believe in a fair day's pay for a fair day's work and that all workers deserve to be treated with dignity and respect," Cuomo said in a statement in December.
"There should be no exception to that fairness and decency."
But critics are concerned the higher wage will lead to restaurant closures.
Already, New York is on course to have a $15 minimum wage in New York City at year's end and in Westchester and Long Island by the end of 2021.
Upstate, the minimum wage will hit $12.50 an hour by the end of 2020.
For every dollar that minimum wage is increased, the chance of a restaurant closing increases by 14 percent, according to the the Restaurant Workers of America.
The group warned that increases to the minimum wage can drive up menu prices and thus drive away customers.
The state Restaurant Association said the change could lead to further use of table tablets instead of staff or fewer hours for employees.
But again, others disagree.
James Mallios, owner of Amali restaurant in Manhattan, supports eliminating the tipped wage, saying it would lead to less turnover and higher wages for his workers.
“I don’t generally agree with the proposition that when you pay people fairly or you pay people well means you go out of business," he said.
“Attrition is far more costly than minimum wage. Losing people is statistically far more expensive than the cost than the hourly wage.”
Upcoming hearings
The state has been holding public hearings on the tip credit and will continue into late June.
It is also taking written testimony until July 1 by emailing: hearing@labor.ny.gov.
The next hearing will be Wednesday at 10 a.m. at Buffalo City Hall.
Other hearings will be held April 20 in Long Island; April 25 in Watertown; April 30 in Syracuse; May 8 in Buffalo; May 18 in Albany; and June 19 and June 27 in the Bronx.
For more information, visit: www.labor.ny.gov/subminimum.
