Restaurant workers weigh in on tip credit expiration

Restaurant workers weigh in on tip credit expiration
<strong> Courtesy Broad Leaf Brewery + Spirits </strong>

While the business community’s stance on the pending tip credit expiration date is widely known, servers appear less on the same page.

A survey by the organization Save Michigan Restaurants found 75% of servers believe they will earn less money if the tip credit is eliminated.

“If this ruling stands, Michigan’s already reeling restaurant industry will face an immediate economic storm resulting in lower income for tipped workers,” SMR spokesperson John Seller said in a statement. “Decision-makers must listen to the tipped workers, who know best due to their daily experiences, because they say the current system allows them to earn far above minimum wage.”

A Michigan Court of Claims ruling on a 2018 ballot proposal could end the tip credit when a stay expires in February, although there is a Michigan Court of Appeals hearing Dec. 13. The current tipping system is used by 42 other states and allows employers to pay 38% of the hourly wage, as long as they recover the rest, or more, in tips.

The SMR survey does fly in the face of some responses from workers in the industry. Multiple servers took to the Michigan Reddit page in response to the GRBJ’s initial report on the hospitality business community’s response to the tip credit expiration date. A Michigan Restaurant and Lodging Association survey found 91% of restaurants would increase prices, with 16% saying they could close.

Servers replying to the Reddit post suggest restaurants are taking advantage of the current system and abusing workers. They also said restaurants that cannot survive the tip credit elimination are following poor business models or are in “overwatered markets and operated by incompetent owners.”

The SMR survey finds tipped servers earn an average of $25.03 per hour. Approximately 26% of respondents said they earn more than $30 per hour.

“Under the current system, I am able to earn as much as $40-$45/hour,” according to Tammy Upchurch, a server in Midland, per the SMR. “If the tipped wage system disappears, the whole full-service restaurant industry would go down.”

The hospitality industry said businesses will be subject to a 206% increase in wage requirements, as they’ll be required to pay the difference. Servers in the Reddit post believe Michiganders will still tip once the credit is eliminated, but whether that stands to be true once prices at restaurants are raised to accommodate the new wages stands to be tested.

The SMR survey was conducted by Carnegie Mellon University faculty member Lloyd Corder and his firm CorCom on Sept. 9. There were 336 tipped employees that responded to the online survey.

“Giving someone a pay cut when you say you’re giving a raise isn’t fair,” Corder said in the release. “Most restaurant workers will suffer mightily if tipped credit is eliminated, and as the data makes clear, they know it.”

Gov. Gretchen Whitmer told Crain’s Detroit Business earlier this year that the immediate increase to minimum wage is “probably not sustainable for businesses.”

“It’s incumbent on the Legislature to come to the table and put together a solution for us to work from. I’m open to doing that,” Whitmer said in October. “That might create some waves on my own side of the aisle. But I’m also pragmatic enough to understand that while that was a policy goal that I share, implementation is going to be really important. I think we should work on what that looks like.

“There are some who say it should go into effect overnight. I know the hardship that’s going to create for business. That’s why I’m saying I would love to sit at the table and cobble together a plan that makes sense.”