According to a survey conducted by the NYC Hospitality Alliance released on Monday, January 29th, an overwhelming 95% of restaurant owners in New York City oppose legislation to abolish the tip credit system.
This system currently permits restaurant owners to pay their tipped employees a base wage lower than the standard minimum wage under the condition that their total earnings, including tips, meet or surpass the minimum wage threshold.
As per the current regulations, New York City restaurant employers are allowed to pay workers who regularly receive tips a base wage of $10.65 per hour, provided that their earnings with tips equal or exceed $16 per hour, the city’s minimum wage.
In the event that tips and base wages do not meet the minimum wage, employers are obligated to compensate for the difference.
The report highlights that servers often earn more than the minimum wage, with their hourly earnings ranging from $20 to $40 when including tips.
Surveyed restaurant owners have expressed concerns that removing the tip credit system could lead to an approximate $12,000 increase in annual expenses for each full-time tipped employee.
Restaurant owners argue that this would lead to higher menu prices, potentially abolishing tipping to manage customer expenses.
The survey also indicates that over half of the restaurant owners might have to reduce their staff or consider shutting down one or more of their establishments in New York.
Andrew Rigie, the executive director of the NYC Hospitality Alliance, commented, “It’s clear New York’s restaurants and bars rely upon the tip credit. There’s no reason for the state’s elected officials to upend the working model of New York’s restaurant industry and put small businesses and jobs on the chopping block while making it much more expensive for New Yorkers and visitors to dine out in the Empire State.”
The report also notes that no restaurant worker legally earns below the minimum wage. It was found that employment in tip credit roles rebounded more quickly post-pandemic compared to non-tip credit positions.
The Hospitality Alliance also pointed to a stagnation in job growth in the restaurant sector in areas like the District of Columbia, where the tip credit has been recently abolished.
On the other side of the debate, supporters of the proposed bill, including the Fair Wage Coalition, argue that the current system fosters inequities among workers.
They are advocating for a policy where wait staff in New York City, Long Island, and Westchester County are paid the minimum wage.
Additionally, the bill proposes a $50 million restaurant worker recovery loan program to assist employers with any short-term increased costs stemming from the change.