Labor

After a tough year for restaurants, Biden wants to eliminate the tip credit

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It’s no secret that restaurants have been particularly impacted by COVID-19 lockdowns and economic restrictions, both in Maine and across the country. More than 60,000 Mainers were employed in the tourism and hospitality industry in the second quarter of 2019, but due to the pandemic and related shutdowns, it lost nearly 20,000 jobs by November 2020.

On November 20, Governor Mills issued what is perhaps her most unscientific edict to date: Forcing restaurants to close their doors at 9 p.m. The administration has not offered the public a single metric it’s using to judge the efficacy of this rule. Listen to Department of Economic and Community Development Commissioner Heather Johnson struggle to explain why the rule was implemented. To this day, the Mills administration cannot answer simple questions about why the rule exists.

The result? Servers and bartenders lost their most valuable wage hours, while others lost their jobs altogether. The day after the rule was implemented, Anthony DeRice, a bartender at Legends Rest Taproom in Westbrook, told The Maine Wire, “Well, I lost my job. I obviously knew it was coming. I am just not sure how closing a few hours earlier will help. It only hurts those relying on those hours to make a living.”

Despite all the hardship experienced in restaurants across the country last year, President-elect Joe Biden has decided the best path forward is to double down on the pain and suffering. The incoming president last week released a $1.9 trillion COVID-19 stimulus package that, in addition to $1,400 stimulus checks and a bailout of the states, includes an increase to the federal minimum wage, from $7.25 per hour to $15 per hour while also eliminating the tip credit.

This news didn’t sit well with the Restaurant Workers of America, a real grassroots group comprised of industry professionals that defends the tip credit throughout the country, including here in Maine. Many of the organization’s Board of Directors were first apart of the Restaurant Workers of Maine, the grassroots group that successfully reinstated Maine’s tip credit after it was eliminated by a 2016 ballot initiative that also increased Maine’s minimum wage.

In response to the president-elect unveiling his plan, Joshua Chaisson, a restaurant worker in Portland, ME, said, “The thousands of restaurant workers who supported Joe Biden feel betrayed tonight, to see him endorse a policy that would be so harmful to our industry. Countless restaurant workers – myself included – were displaced due to COVID. As the industry starts to recover, we need a President who understands that tipping and tip credits are essential for employees and employers.”

“I stood alongside thousands of servers in New York to fight this idea, and we fought it successfully. We turned out in large numbers because we don’t want the tip credit eliminated. That’s our message to President-elect Biden. We don’t want this,” said Maggie Raczynski, a bartender from New York.

Biden doesn’t seem to understand the dynamic of the tip credit and why its beneficial for both parties involved. Restaurant workers make more in tips than they would with a flat minimum wage due to the generosity of restaurant patrons. Customers reward good service with good tips.

On the other side of the equation, restaurants, which operate on razor-thin profit margins, have less labor costs with the tip credit. Customers ultimately pay as much or more of staff wages through tips, allowing owners to keep menu prices competitive. If a tipped worker’s base wage and tips do not equate to the minimum wage, the employer must make up the difference.

Simone Barron, a restaurant worker from Seattle, is all too familiar with the consequences of minimum wage hikes that eliminate the tip credit.

“I’ve experienced first-hand the consequences of no tip credit, having lost my job and seen my restaurant close because of Seattle’s unrealistic wage mandates. Restaurant workers support the tipping system, and tip credits – which President Biden would understand if he spent more time talking to us and less time talking to labor groups,” Barron said.

It’s hard to grasp why the president-elect thinks restaurants can afford such a massive increase to labor costs at a time when the industry is struggling so mightily. The pressure on members of Congress to approve the new president’s stimulus package will be unbearable. If the final version does not retain the tip credit, you can say goodbye to many of your favorite local establishments.

Photo Credit: Gage Skidmore from Peoria, AZ, United States of America, CC BY-SA 2.0 https://creativecommons.org/licenses/by-sa/2.0, via Wikimedia Commons

About Jacob Posik

Jacob Posik, of Turner, is the director of communications at Maine Policy Institute and the editor of The Maine Wire. He formerly served as a policy analyst at Maine Policy. Posik can be reached at jposik@mainepolicy.org.

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