insider@insider.com (Juliana Kaplan) 1 hour ago
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More restaurants are forgoing tips and upping wages to attract workers, according to the New York Times.
It's the latest iteration of the labor crunch felt across the economy as workers quit in droves.
It's also bringing tipped wages over the federal minimum wage of $7.25, something Democrats failed to pass.
Nex time you go out to eat, you may pay a service charge instead of a tip. That's because there's a huge labor crunch in the service industry, and employers can't risk the chance their workers get stiffed.
The New York Times' Jane Black reports that, as service workers leave the restaurant industry in droves, and employers attempt to lure them back, some restaurants are doing away with tips altogether. It's yet another way the labor shortage is changing how much - and now, how - workers are paid, as some either take advantage of a hot labor market to switch roles or quit due to burnout and compensation concerns.
One chef interviewed, Jason Hammel of Lula Cafe in Chicago, said that he raised his hourly wages to come in between $18 and $24 - which would be offset by a 20% service charge on all checks. At Hammel's restaurant, any tips that came in on top of that service charge would be split by employees. And, unlike many other anecdotal restaurateurs, Hammel hasn't had issues with hiring new staff.
In the majority of states, service workers can be paid a "tipped wage" - essentially a lower minimum wage meant to take tips into account and bring workers up to the minimum wage through those tips. That rate is just $2.13 an hour, over $5 below the federal minimum wage of $7.25. Seven states are what some activists call "one fair wage" states, meaning that the minimum wage for tipped workers is the same as the minimum wage for all other workers
A February analysis from the National Women's Law Center found that female tipped workers were more likely to be in poverty. In those one fair wage states, the poverty rate for Black tipped female workers was 34% lower than states with the $2.13 wage. And a March report from advocacy group One Fair Wage found that, during the pandemic, tips were down for female tipped workers - but harassment was up.
Sen. Bernie Sanders has been one advocate for ending the subminimum tipped wage. In a March press call for Equal Pay Day, Sanders said: "I know there's a lot of talk about equal pay for equal work. If that's the case, maybe we want to raise the tipped wage."
Sanders led the charge on the Raise the Wage Act, which would have brought the minimum wage to $15 by 2025 and would phase out the subminimum tipped wage. While Democrats failed to advance the measure through President Joe Biden's first stimulus package, the current labor shortage seems to be tackling the restaurant industry's lower minimum wage on its own.
A new analysis from One Fair Wage looks at how wages have changed in restaurants across the country. The report comes as workers quit in record-breaking droves for the fourth month in a row, and employers find themselves hiking pay to try and lure in prospective employees. A recent survey by job site Joblist found that 45% of the respondents leaving the industry were switching out for higher pay.
The One Fair Wage analysis, which spans two weeks, found over 1,600 restaurants with wages at the full - not tipped - minimum wage, with tips on top of that. Those restaurants are in 41 states where, earlier in the year, the "vast majority" of restaurants paid $5 or less.
Now, the average wage is $13.50 - a rate just below the $14 minimum Democrats hoped to set by 2024.
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