Come July 3, thousands of Ohio’s tipped workers could be staring down the barrel of job losses and severe cuts to their take home pay if a measure that would phase out the tip credit and raise the state’s minimum wage makes its way onto Novembers’ ballot.
Ohio’s tipped workers aren’t naive. They’ve seen the data and know similar policies have cost jobs and earnings across the country. Now, they are worried they’ll see their own paychecks decimated.
Economists Williams Even and David Macpherson from Miami and Trinity universities estimate a $15 minimum wage with full tip credit elimination would cost more than 63,000 Ohio restaurant employees their jobs and more than $48 million in earnings.
On top of that, 93% of tipped workers say they prefer the current tipping system, according to a recent survey of nearly 1,000 employees by the Ohio Restaurant and Hospitality Alliance.
Ohio’s current system allows tipped servers and bartenders to make a base hourly wage of $5.25 an hour before tips. If their tips do not earn them at least the state’s current minimum wage of $10.45 per hour, state law requires restaurants to pay workers the difference.
This is rarely necessary since the average Ohio server or bartender currently makes $20 per hour when factoring in tips. Some even make as much as $60 an hour. This constitutional amendment would raise the state’s minimum wage to $15 per hour but upend the tipped wage system that benefits servers and bartenders.
Many assessments of the wage debate are misguided: shifting employees from a lucrative tipping environment to a $15 hourly wage with more uncertain tips would be a pay cut for the restaurant employees of Ohio, not a pay bump.
In fact, these surveyed Ohio employees feared just that – 91 percent said they believe their income would drop if the tip credit system were eliminated. Cornell University’s Michael Lynn has documented that across the country, state tipped wage increases have caused the tip percentages servers and bartenders receive to decrease.
This is already playing out elsewhere. Servers in Washington, D.C. have reported receiving fewer tips since a recent ballot measure began eliminating the city’s tip credit last year. One server even said his nightly take-home pay has been cut in half.
This happens due to a variety of unfortunate realities. As restaurants navigate tipped wage hikes, they are forced to increase prices – potentially driving away customers – or add automatic service charges to offset the rising cost of hourly wages.
If these attempts still don’t help the restaurant earn enough revenue to compensate for higher wage mandates, they may be forced to reduce scheduled shifts, downsize staff, or even shutter completely. One Ohio restaurant operator put it this way, “my guests would pay more, my servers would make less, and there is a real chance I would have to close my restaurant.”
All roads lead to fewer jobs.
The majority of American labor economists agree raising minimum wages costs jobs. In a survey of American labor economists by the Employment Policies Institute, three-fourths of economists agreed with this finding. In fact, an “overwhelming” majority of studies in the last three decades have found that ill-advised minimum wage hikes have negative effects on employment. Coupling a major minimum wage hike with full tip credit elimination would only add insult to injury.
Tipped employees know this reality better than anyone, and this isn’t a policy they are asking for. Ohioans should be wary of feel-good political statements and instead listen to their local servers and bartenders.
