Will New York restaurants, under pressure from rising health care costs and rents, really struggle to stay open as the state increases the minimum wage for waiters and bartenders? Is the restaurant industry actually “in turmoil,” to borrow a Crain’s headline from this summer, as Governor Andrew Cuomo contemplates fully eliminating the tipped minimum?
A new study suggests no.
The report, by the Institute for Policy Studies, a progressive think tank, and the Restaurant Opportunities Center (ROC), a group that advocates for restaurant workers, looked at a two-year period after New York hiked the tipped minimum from $5 per hour to $7.50 per hour. What they found was overwhelmingly positive: Job growth at full-service restaurants went up, and take-home pay “increased significantly.”
This could soon be relevant to New Yorkers: Cuomo’s labor commissioner, Roberta Reardon, held a series of hearings across the state this year on the subject of doing away with the tipped wage, the lower minimum for employees eligible to receive gratuities.
The potential move has its critics; the New York City Hospitality Alliance, which represents restaurants, says eliminating the tip credit would be “disastrous,” arguing that that raising or eliminating that minimum has stifled restaurant growth and caused employers to cut back on hours.
“I’m not shocked that a report published by an organization that wants to eliminate the tip credit found reducing it doesn’t hurt employment and restaurants,” says New York Hospitality Alliance executive director Andrew Rigie when asked about the study.
But the report, which relied on Quarterly Census data, found “no statistical evidence” of a negative impact from the tipped minimum. Employment at full-service restaurants rose by 4 percent from 2015 to 2017; that’s down from post-recession highs but it still outpaced the state’s overall jobs growth.
The actual number of restaurants, in turn, went up by over 10 percent, over twice the rate of any neighboring state, per the report. Average annual salaries also went up by roughly the same percentage. That’s inclusive of both tipped and non-tipped workers, who also saw minimum wage hikes.
Researchers for the study looked at the larger state, versus New York City. The number of jobs in full-service restaurants in the city grew by nearly 2.75 percent in 2017, higher than the city’s overall employment growth rate. And while it’s too soon to tell what growth was like in 2018, when the tipped minimum in the city went up to $8.70 per hour, overall restaurant employment remained near a 10-year high by September.
If Cuomo eliminates the tipped minimum, all workers would eventually earn at least $15 per hour before gratuities. Seven other states operate on a single wage system as well: California, Oregon, Washington, Alaska, Minnesota, Wisconsin, Minnesota, and Nevada.
This study reflects what’s happening in other cities like Seattle and San Francisco, where the minimum wage is approaching $15 per hour, and where bar and restaurant jobs continue to hover at all-time highs, even as growth slows (or turns negative, as was the case with San Francisco in 2017).
Still, these comparisons aren’t perfect. What makes the New York version of this public policy experiment a bit more complicated is the fact that San Francisco and Seattle have a long history of paying waiters the full minimum. In the Empire State, restaurants are only beginning to grapple with seeing hourly wages for waiter and bussers rise to $10, something that will happen by the year’s end in the Five Boroughs.
The study did not individually look at server pay. City waiters, who can collect tips, often make more than cooks and other back-of-the-house counterparts. Raising or eliminating the tipped minimum in the five boroughs could exacerbate that wage disparity.
But outside the Big Apple, that discrepancy is slimmer or nonexistent. Statewide, entry-level waiters make about $21,632 annually, while cooks make about $22,220.
One of the central positions of ROC is the elimination of what it brands the “sub-minimum wage,” citing higher rates of poverty and sexual harassment among the tipped workforce. I’ve spoken out against the culture of tipping and have criticized Cuomo for failing to take steps to eliminate the tipped minimum previously.
While the federal minimum wage has stagnated at $7.25 per hour for nearly a decade — the tipped minimum has remained fixed at $2.13 for nearly thirty years — Cuomo has enacted multiple wage hikes to keep pace with the higher cost of living in New York. The state’s tipped minimum, $5 per hour just a few years ago, will have fully doubled in December when it reaches $10 for city restaurants with 11 or more employees. Establishments in Long Island and Westchester will have another three years to hit that mark.
Already, individual restaurants have bemoaned rising labor costs, with some businesses citing the increase as one reason they are closing. Some venues in New York have been doing away with gratuities to manage the burden of higher wages, while others have seen those anti-tipping efforts fail.