Current wage model works
As the nation’s second largest private-sector employer, America’s 1 million restaurants continue to feed our nation’s economy and provide career opportunities to 14 million Americans across all parts of our industry, tipped and non-tipped.
The practice of tipping is what attracts millions of employees to our industry. Americans overwhelmingly support a system that rewards good service. In fact, 65% of consumers asked said they would keep the tipping system. Service through seamless teamwork is the heart of the restaurant community, and tipping puts these core values front and center.
Let’s be clear: Under the law, no restaurant employee should be making a “subminimum wage.” If an employee’s tips plus cash wages do not add up to at least the federal minimum wage of $7.25, or higher in most states, the employer is required to make the employee whole.
There is a misconception that the wage for tipped employees — including servers and bartenders — has been stagnant. Although the federal minimum wage has remained unchanged, the total wages for tipped employees have increased sharply.
Unlike in most occupations, earnings of tipped employees are directly tied to the price of the goods and services their business sells. Earnings of tipped employees in restaurants rise when menu prices go up because tips are calculated on the total check. As food costs have risen, restaurateurs have had to adjust menu prices.
According to our analysis of Bureau of Labor Statistics data, from 1991 to 2014, menu prices rose at an average annual rate of 2.6%. Because tips are tied to prices, this acted as a 2.6% annual cost-of-living adjustment.
It’s important to remember that we are an industry of small businesses. More than 90% of U.S. restaurants are owned independently or by franchisees. The cost of keeping a restaurant in business is high, and it’s hard to survive. Any increase to the current wage model will be felt across our industry.
Americans are happy with tipping; servers are guaranteed at least the federal minimum wage under the law. Why change what works for our industry and our employees?