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Chamber signs onto letter regarding the real facts about the tip wage at NYS restaurants

Tuesday, May 22, 2018

The real facts about the tip wage at NYS restaurants and serious potential economic consequences for New York businesses and employees.

Members of the NYS Legislature recently received a sign-on letter from advocates seeking the elimination of the tip wage/tip credit in NYS. That letter contained a significant number of misrepresentations about this issue and a number of alleged “facts” that are not supported by objective data. On behalf of businesses and employees across NYS who would face serious economic consequences if the tip credit is eliminated, we urge you to consider the following points and facts:

  • There is no “subminimum wage” for restaurant workers in New York State. Every single employee – tipped or non-tipped – is required by law to receive the legal minimum wage. If an employee does not receive the legal minimum, the employer is breaking the law and the issue is one of enforcement, not the law itself. If this issue is about preventing wage theft, then policy makers must ensure that the NYS Department of Labor has the resources needed to enforce the law.

 

  • Tipped restaurant servers in New York State are not among “the poorest” workers in New York. Restaurant workers around the state have testified at the Labor Department’s tip credit hearings about the middle class lifestyle they’re able to enjoy due to their employment as tipped workers. They’re happy being compensated under the current system and don’t want it to change. The reality is that a NYC Hospitality Alliance survey of 486 city restaurants, which employ nearly 14,000 tipped workers, found that those servers earn on average $25 per hour.

 

  • Claims that restaurant workers in other locales with no tip credit are better paid than those in New York are blatantly false. According to the federal Bureau of Labor Statistics, waiters & waitresses in New York have an average wage higher than their counterparts in six of the seven states with no tip credit. Bartenders in New York have an average wage, higher than their colleagues in five of the seven states with no tip credit. And the data seems to indicate that restaurant workers in New York receive substantially more in tip wages than those in all of the no tip credit states – more than 50% higher than our closest rival.

 

  • Workers fear that eliminating the tip credit will result in drastic changes in restaurants’ business operations and they’ll suffer as a result – with good reason. Many restaurant workers who have presented testimony to the Department of Labor expressed concern about the economic consequences they’ll face if the tip credit is eliminated. They’ve seen restaurants opt out of the tip credit system and take various steps to adjust to the increased operational costs only to revert back to the tip credit system after receiving pushback from their employees and customers. The research shows that imposing such a substantial wage increase on businesses will force them to reassess their business operations in order to become more efficient and to adapt their operations to adjust to significantly higher wage levels. And there is evidence that eliminating the tip credit reduces the employment and hours of tipped workers.

 

  • New York hospitality businesses are already feeling economic impacts. After the state’s 50% tipped wage hike on December 31, 2015, Labor Department data showed that employment growth in the state’s full-service restaurants fell to less than one-third of its average over the previous three years. NYS also had a net loss of over 270 full-service restaurants—after consistent growth in prior years. In NYC the damage was even worse; a rising tipped wage reduced robust full-service employment growth averaging 6.7% down to barley one percent. From 2012-15, there was 23% growth in the number of full liquor and beer & wine licenses in NYC. From 2016-17 – after the 50% increase in the tip wage – that same growth dropped to 1.5%.

 

  • The suggestion that harassment cases are lower in states with no tip credit is not true nor supported by federal data. EEOC data covering a time period similar to the report that made that claim shows 1.8% of sexual harassment claims in New York came from the restaurant industry, compared to nearly 4% in California--New York’s closest equivalently-sized state without a tip credit.

 

  • The advocates of eliminating the restaurant tip credit claim its responsible for workers being susceptible to sexual harassment, but inexplicably claim that they don’t want to eliminate tipping. Even if New York eliminated the tip credit, employees would still rely on tips for income, therefore, according to the advocates’ logic, these workers will still be trapped in an economic system where they can be victimized. If they truly believe there is a correlation between tipping and sexual harassment then why do they say they want to preserve the tipping system, rather than abolish it? Sexual harassment and exploitation of workers is unconscionable and illegal. New York State and New York City recently mandated anti-sexual harassment training for private employers, which should act as an effective tool to address this abhorrent behavior that impacts our whole society. NYS regulators and policy makers must take all allegations of wage violations and/or workplace harassment seriously and ensure workers are treated lawfully by their employers, co-workers and customers. But to seek to address these issues through the elimination of the tip wage/tip credit – no matter how well intended a proposal – does not make sense from an economic or public policy perspective and is not supported by the facts. We look forward to working with the NYS Assembly, NYS Senate, Governor Cuomo and the Department of Labor to ensure that our state’s workers are treated fairly, and our critically important hospitality industry can continue to play its long-time role as a major job creator and economic engine across New York. Thank you.

 

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Letter: The real facts about the tip wage at NYS restaurants and serious potential economic consequences for New York businesses and employees