Preserving the tip credit is crucial to survival of local restaurants
As Connecticut restaurant owners, we’ve felt firsthand the many challenges facing our state’s service industry in recent years, not only due to the pandemic, but also problems caused by inflation, worker shortage and more. The vast majority of restaurants are small businesses, many of them family-owned, and we navigate razor-thin business margins even in the best of times. The persistence and determination our industry has demonstrated in recent years shows what makes us so integral to local economies across Connecticut.
In that context, it’s particularly troubling that the Connecticut General Assembly is currently considering legislation that would cause considerable harm to small businesses like ours. The measure in question would eliminate the state’s longstanding tip-credit system, a change that would not only compound the challenges mentioned above, but also harm our employees.
Connecticut’s minimum wage is now $15.69 per hour, the third-highest state minimum in the United States. All workers — including servers and bartenders — are guaranteed to earn at least this much per hour. Where the restaurant industry is unique is that the tip credit system allows restaurant owners to pay a smaller share of the hourly wage, so long as tips bring the employee’s wage over the $15.69 minimum. In other words, if someone works a slow shift and their tips and salary don’t add up to the minimum hourly wage, we are required to make up the difference.
This system works well, and in fact Connecticut servers on average earn more than $30 per hour. Eliminating the state’s tip credit would assume a one-size-fits-all approach to wages that will harm the very workers that doing so would supposedly protect, which is why we oppose this legislation. Just last month, a survey conducted by CorCom Inc. found that 96% of Connecticut servers and bartenders oppose the proposed changes to the state’s tipping system. The survey found that 95% of tipped employees are concerned that they would earn less income if the bill were to pass, with 91% currently earning more than $20 per hour and 61% earning more than $30 per hour.
Our employees choose our industry for many reasons, including flexible hours and room for career growth. We are an industry that is proud to offer career options to a rich cross-section of workers, including those without a higher education, previously incarcerated individuals looking for a second chance, single parents working hard to balance a family budget, and others who might find their career options more limited in another industry.
From a business standpoint, the removal of the tip credit would also impose significant financial strain on small, independent establishments like ours. It will make it harder for us to compete with larger chains that can easily absorb the increased costs this bill would cause. By increasing labor costs without the offsetting mechanism of the tip credit, we will be faced with difficult decisions: raising prices, reducing staff, cutting hours, or, in some cases, even closing for good. None of these options benefit our state’s workers or our communities.
In this way, the proposed change would risk diminishing Connecticut’s flourishing dining culture. Our state, and southeastern Connecticut specifically, is home to a vibrant and diverse array of restaurants that not only serve as gathering places for our communities but also attract visitors from around the world. As restaurant owners, we continue to struggle with worker shortages and employee retention. A flat-wage model, like the one the legislature is considering, would decrease a worker’s earning power which would only exacerbate this problem.
It’s essential to understand that advocating for the retention of the tip credit is not an argument against fair wages. The hospitality industry is committed to supporting its workers, without whom these businesses would not exist. Rather, it’s an argument for maintaining a system that recognizes the unique circumstances surrounding restaurant work — a system that both restaurant owners and employees support.
The tip credit offers our employees the ability to earn significantly more than the minimum wage, and allows us to manage costs effectively, ensuring that they can continue to provide high-quality food, service and jobs in our communities. It should be supported and maintained.
Olivia Formica is the owner of Flanders Fish Market in East Lyme and 374 Kitchen & Cocktails in Niantic. Rodney Green is the owner of Olde Tymes Restaurant in Norwich. Jon & Mari Kodama are the owners of Steak Loft and Go Fish in Mystic, and Breakwater in Stonington.