One Fair Wage, a nonprofit dedicated to ensuring tipped workers earn at least the full minimum wage, announced a $25 million campaign to convince 25 states to remove the tipped wage by 2026, which marks the 250th anniversary of U.S. independence.
The Fair Labor Standards Act allows employers with tipped workers to pay as little as $2.13 per hour in direct wages—otherwise known as a subminimum wage—with tips making up the balance of the federal minimum wage, which is $7.25 per hour.
One Fair Wage is focusing on states currently looking into ending the subminimum wage, including New York, Michigan, Massachusetts, California, Illinois, and Washington, D.C. The organization said the campaign is being supported by Solidaire, a community of donor organizers; the Hearthland Foundation, a nonprofit run by Steven Spielberg and Kate Capshaw; and Joe Sanberg, entrepreneur and cofounder of online banking firm Aspiration, Inc.
D.C. is being used as the launching pad. The DC Committee to Build a Better Restaurant Industry, run by One Fair Wage, recently announced it gathered enough signatures to place “The Tipped Credit Elimination Act” on the ballot for the June 2022 primary election. If implemented, the measure would gradually increase D.C.’s tipped wage—currently $5.05—until 2027, when it matches the minimum wage of $15.20.
Voters in the country’s capital passed a similar ballot in 2018, but it was eventually removed by the city council after a number of complaints from restaurants and workers.
“It’s time for states—and the policymakers who represent them—to follow the lead of millions of workers refusing to work for poverty wages and thousands of independent restaurants raising wages to recruit staff, and permanently raise wages and end subminimum wages once and for all,” Saru Jayaraman, president of One Fair Wage, said in a statement. “This is the only future for the service sector and the economy overall: wages must go up or there will be no future.”
Darden CEO Gene Lee said the elimination of the tip credit is pushed by politicians and activists, but neither the consumer nor the employee want the relationship to change. The restaurant veteran said it’s difficult for the industry to communicate this because it’s not as strong of a “bumper sticker” as saying “$2.13 is not a fair wage.”
The Olive Garden parent announced in December that it would raise its minimum wage to $12 per hour for workers, including tips. Lee noted the $12 figure represents an entry-level position in rural America. In reality, the wage increase will bump Darden’s average pay to $20 per hour, plus tips.
“No one’s making $2.13, but we need more than a bumper sticker to communicate that, and that becomes very hard for us to do,” Lee said. “I’m hoping that we can have the National Restaurant Association and some of the larger chains have conversations with the powers to be and explain how that works. ” … I think there’s a big misunderstanding out there, and we’re going to have to try to do as much education as we possibly can.”
One Fair Wage reported in September that more than 1,600 restaurants across 41 states were paying an average wage of $13.60 plus tips. These are locations that previously paid a subminimum wage to tipped workers, but now have raised compensation to the full federal minimum wage or higher, with tips on top.
According to the Economic Policy Institute, 16 states use the federal tipped minimum wage of $2.13, 26 use a tipped minimum wage above the federal limit, but below its state minimum wage, and eight have eliminated the tipped minimum wage in some form.
The restaurant industry added 108,000 jobs in January, but still remains about 900,000 short of where it was prior to COVID, according to the Bureau of Labor Statistics. In October, Joblist released a survey in which it received feedback from more than 25,000 job seekers across the country. One-third of hospitality workers reported being “dissatisfied” or “very dissatisfied” with their jobs and 58 percent said they were planning to quit before the end of 2021.