The fight to retain Ohio’s tip credit escalated Tuesday with the release of data showing local servers and bartenders are as eager as their employers to maintain the state’s two-tiered minimum wage.
A survey of just under 1,000 tipped restaurant workers found that 93% are content with working for a lower direct wage as long as customers keep tipping at their current rates. About 90% of tipped employees in the state now earn between $19 and $41 an hour despite being paid just $5.25 directly by their employer, according to the Ohio Restaurant & Hospitality Alliance (ORHA), which commissioned the research. The difference comes from gratuities.
The data showed that 85% of servers and bartenders believe customers would tip less, if they tipped at all, if the state disallows restaurants from counting gratuities toward the minimum wage servers and bartenders are due. The workers revealed a fear that guests would assume employees earned enough with their higher wages to make tipping unnecessary. About 91% said they’d expect their incomes to drop.
“Every server or bartender would agree with me, we do not want this system touched,” Lindsay Odell, a bartender at the Submarine House in Dayton, Ohio, said during the ORHA’s press event. We do not want to lose our tips.”
Tipped restaurant employees in Ohio currently earn an average of $27 an hour because of gratuities, according to the ORHA.
The research is aimed at derailing a drive by organized labor to kill the tip credit and raise the state minimum wage to $15 an hour via a referendum on the November ballot. The current minimum is $10.45.
The restaurant association is countering the effort on two fronts.
It has voiced support for legislation that would raise the pay floor to $15, albeit more gradually than the ballot initiative would. Yet the industry endorses the bill because it would maintain the tip credit, though the portion of the minimum wage paid directly by employers would rise from the current $5.25 to $7.50 an hour.
Simultaneously, the association and its allies are trying to educate voters on why a “yes” vote on eliminating the tip credit would harm more than help servers, bartenders and other tipped employees.
The trade group had earlier released data that indicated consumers themselves would feel a financial pinch if the ballot initiative is approved. That data showed full-service restaurants would likely raise menu prices by 20 to 25% to cover the sudden climb in their labor costs.
“It would increase labor costs by $4.50 an hour,” Tod Bowen, the ORHA’s managing director of external affairs and government relations, said during Tuesday’s press conference. “That would be a 43% interest in the minimum wage.”
During Tuesday's event, restaurateur Laurie Torres recounted an experiment she'd conducted on her own at Mallorca, her popular restaurant in Cleveland.
"I've run the numbers and now share two menus with customers: one with my current prices and a second where my menu prices would have to rise about 22% to cover the elimination of the tipped wage," she recounted. "Time and time again, customers say they would visit less often and tip less dollars.
"If the ballot initiative passes, my guests would pay more, my servers would make less and there is a real chance I would have to close my restaurant and lose my dream."
More than 9 of 10 full-service restaurateurs in the state (93%) want to retain the tip credit, according to earlier research commissioned by the ORHA.
Organized labor has increasingly resorted to ballot initiatives in hopes of raising wage rates and killing the tip credit. That mechanism resulted in the on-going phase-out of the tip credit in Washington, D.C., which in turn triggered a widespread adoption of service surcharges as a way of contending with the upswing in labor costs. Wage-focused ballot initiatives tend to pass because voters are essentially asked if they’d like their wage-earning neighbors to earn more money.
Initiatives to phase out the tip credit are expected to be on the ballot in Massachusetts and Arizona.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.