Congress Should Honor Servers on National Waitstaff Day and Keep the Tipped Wage

It’s National Waitstaff Day – a day in which the U.S. Census Bureau has noted as “the day to add a little extra to the tip you leave at a restaurant that happens to be open.” Quite frankly, every day should be National Waitstaff Day considering how much waitstaff works and how the restaurant and bar industry was gutted during the pandemic. Unfortunately, federal lawmakers, many who have long sought to abolish this very essence of American restaurants and bars, may be able to finally get their way in eliminating the federal tipped wage.

Beginning in January 2022, President Biden issued an Executive Order in April that phases out the tipped wage for federal contractor employees.  The Order also states that dtipped workers must earn a minimum cash wage of $10.50 per hour. This will increase in 2023, to tipped workers earning 85 percent of the minimum wage and then by 2024, they will earn 100 percent of the minimum wage.

In 2019 (prior to the pandemic), lawmakers in Washington were able to pass the Raise the Wage Act in the House of Representatives. Had it passed, and been signed into law, the legislation would have gradually increased both the federal minimum wage to $15 per hour. The bill would have also phased out other minimum wages, including the tipped workers wage and wages for youth and disabled workers. The Raise the Wage Act of 2021 has been introduced in the both the House and the Senate earlier this year.

As we know, COVID-19 hit the American economy hard, but it hit the food and beverage sector harder. The Census Bureau notes that prior to the pandemic, “there are more than 579,00 eating and drinking places operating nationwide,” and until the pandemic, “almost $600 billion was spend in these establishments.” Further, until widespread shutdowns, of the more than 11 million Americans employed in restaurants, an estimated 2.1 million Americans were employed as waitstaff, with “nearly seven out of 10 … whom were women.”

As lockdowns took effect, many waitstaff lost their jobs and restaurant owners lost business. The National Restaurant Association’s (NRA) 2021 State of the Industry report noted that COVID-19 had a “devastating impact” on restaurants. In fact, 2020 total sales were “$240 billion below the Association’s pre-pandemic forecast for the year,” and that at the end of 2020, restaurants were “nearly 2.5 million jobs below … pre-coronavirus level[s].” The NRA sadly reports that the “restaurants got hit harder than any other industry during the pandemic,” and have a difficult task to get back to pre-COVID employment levels.

Most American restaurants and bars are not raking in millions and profit margins are notoriously slim, with full-service restaurants average a 3-5 percent profit margin, fast casual establishments average 6-9 percent, and catering services averaging a 7-8 profit margins. Restaurant365 notes that higher profit margins in different styles of restaurants “reflects the lower labor costs for pre-prepared food in the kitchen and a higher table turnover rate.”

Adding to labor costs for these small businesses will undoubtedly overwhelm already-burdened owners and employees. Labor costs are already one of the largest expenses for restaurant owners, and are estimated to be around “30 to 35 percent of gross sales.” Should restaurants be forced to increase their tipped wages, some may see labor costs increase by 600 percent. Many restaurants are small businesses, and in 2017, more than 90 percent of “restaurants [had] fewer than 50 employees.”

As small businesses, restaurant owners cannot easily absorb increased labor costs. According to a February 2021 survey by the NRA, when asked about the possible elimination of the tipped credit to $15 an hour, 98 percent of restaurant owners responded they would “increase menu prices” and 84 percent replied that “they will likely cut jobs and employee hours from normal levels,” and 75 percent responded they would cut “benefits from normal levels.”

Moving past the restaurant industry, a $15 per hour minimum wage mandate would actually decrease jobs. According to a February 2021 report by the Congressional Budget Office examining the effects of the Raise the Wage Act, 2021, if enacted, the federal budget deficit would increase by $54 billion between 2021 and 2031, and worse, “employment would be reduced by 1.4 million workers.” More workers would be displaced than lifted out of poverty because  the Act would reduce the number of people in poverty by only 0.9 million.

Deeply problematic is that, prior to the pandemic and widespread restaurant shutdowns, many servers in restaurants did not want to eliminate tips. A 2019 survey of restaurant workers found that “they wouldn’t accept a substantial increase in hourly pay if it meant eliminating tips.” Moreover, many servers already earn more than $15 an hour. Joshua Chaisson is a server and vice President of Restaurant Workers of America, and estimates that he earns on average $22 per hour.

As of December 1, 2020, nearly 17 percent of American restaurants were closed due to the pandemic. While America may be moving to a sense of normalcy, many barriers remain for owners in the food and beverage industry, including local restrictions, labor shortages, and increased food costs. This National Waitstaff Day, lawmakers should pay attention while dining out.  While they may be trying to help these workers – that aren’t asking for help – they may actually end up harming them by eliminating their jobs.

Lindsey Stroud is a policy analyst with Taxpayers Protection Alliance.