On June 19, District of Columbia voters (at least those who care to exercise the right on the day of a primary election that is almost always characterized by low turnout) will weigh in on Initiative 77. This ballot question, if passed, would eliminate the tip credit for servers and bartenders in D.C. Under this credit, a different minimum wage applies to tipped workers, since they earn most of their money from tips — usually significantly more than the minimum wage. In the unlikely event that that does not happen, their employer is legally required to cover the difference, ensuring that they still earn the regular minimum wage.
The minimum wage in D.C. is currently $12.50 an hour, which is 72 percent higher than the mandated federal minimum wage of $7.25. By 2020, the D.C. minimum wage will rise to $15 an hour. For tipped workers, like waiters and bartenders, the minimum wage is $3.33 an hour, rising to $5 by 2020. This practice is fairly standard throughout the country, and works well for all involved. Waiters are incentivized to provide the best possible service, diners can reward good service, and restaurants and bars ensure their employees make at least the minimum wage while maintaining a competitive edge.
Initiative 77 would upset this balance, reduce wages for workers, and threaten the vibrant D.C. restaurant scene. D.C. waiters currently enjoy huge earning potential thanks to the tips they receive. Under Initiative 77, their earnings would nosedive. Restaurants would add a service charge that would increase the cost of meals and drinks, and many customers would either reduce their tips or stop tipping altogether. This extra charge would go to the restaurant, rather than the server. Being a waiter or bartender would increasingly be a minimum wage job instead of a pathway to the middle class. Hours will be reduced, hourly earnings will be stagnant, and restaurants and bars will close.
This impact will be felt more severely in underserved parts of the nation’s capital. A steakhouse on Capitol Hill that is used for fundraisers by politicians and lobbyists is always going to have business, and a no-limit corporate credit card can always afford to tip handsomely. But the summer interns who go to lunch at a nearby cafe might find it makes more financial sense to bring a lunch from home. In areas without a plethora of food options, a few chain restaurants will continue to dominate the scene since they can more easily absorb increased costs; it will be more difficult for local small businesses to compete.
Removing the tip credit would shift tipped workers onto a system of pay that weakens their autonomy and treats them simply as salaried employees. Their income taxes would be withheld, and they would have less take home pay. Initiative 77 is good for the IRS, union bosses, and politicians who like spending taxpayer money when paychecks are withheld; It would be bad for for workers, especially those in tipped jobs that require a high degree of entrepreneurship, because they’d take home less of their money immediately. People spend their money more wisely than the government, and, to put it mildly, the D.C. government does not have the best record of spending taxpayer dollars in an effective manner.
Deep-pocketed special interest groups are campaigning for Initiative 77 in the name of social justice, most notably the Restaurant Opportunities Centers United, a front group for Big Labor. ROC United’s most recent annual budget totaled more than $9.8 million. The organization completely ignores the fact that restaurants are already required to ensure their tipped workers earn minimum wage and regurgitates typical anti-business arguments.
Fortunately, both restaurant workers and owners, who are diverse in every way imaginable and hold a wide variety of ideological viewpoints, have raised their voices against this harmful initiative. A majority of the D.C. Council and Democratic Mayor Muriel Bowser, concerned that it would devastate the restaurant scene in their city, oppose Initiative 77 as well. Even the aggressively pro-labor Washington Post editorial board opposes this misguided initiative, writing that “the big losers might be lower-income consumers, for whom dining out is a special treat they might no longer afford if menu prices go up.”
The D.C. restaurant industry is thriving. Tipped workers are making at least the minimum wage, and often much more. Restaurateurs of all types are opening new locations and offering diners new culinary adventures. Initiative 77 is a bad idea that would put the industry at risk, lower wages, reduce hours, and cut employment.
Spencer Chretien is a state policy manager for Citizens Against Government Waste.
