A new bill, which would increase the federal minimum wage from $7.25 to $15, passed July 18 in the U.S. House of Representatives. If also passed by the Senate, the rate increase would be the first in over a decade.
Over the next six years, H.R. 582 or the Raise the Wage Act, would phase out the tip credit model and increase tipped employees to $15 an hour. The last time Congress increased the rate was in 2007. For tipped employees, the current wage is $2.13 an hour if those employees are able to bring in the remaining $5.12 in tips to raise their income to meet the minimum wage.
The bill outlines the incremental changes employers will make until they reach the $15 rate in 2025. If the measure successfully makes it out of Congress, employers can expect to make changes almost immediately. Three months after the Raise the Wage Act would be enacted, wages for tipped employees would increase to $3.60 following a $1.50 yearly increase.
For non-tipped employees, the Raise the Wage act outlines an increase to $8.35 per hour within three months of it becoming law.
This updated model simply doesn’t work for the restaurant industry, National Restaurant Association executive vice president of Public Affairs Sean Kennedy said in a statement.
“Our industry’s 15 million employees are our greatest asset and we support a commonsense approach to minimum wage that would benefit employees and ensure that restaurants remain part of the fabric of their communities,” he said.
The repercussions of the wage increases will greatly impact the restaurant industry, Kennedy added. Instead of helping workers, it may end up eliminating millions of jobs.
“H.R. 582 is the wrong wage at the wrong time, implemented in the wrong way, and as the Congressional Budget Office noted in its nonpartisan analysis, the bill could end up having the unintended consequence of eliminating up to 3.7 million jobs,” Kennedy said.
Restaurant owners have reached out to the Association voicing their concerns about what the actual impact of this bill will have on their business. By phasing out the tip credit, the new law could end up cutting wages for some workers instead of increasing it.
“Thousands of restaurant industry employees, leaders and community members have called and emailed Congress to share their concerns about how H.R. 582 would cripple small- and family-owned businesses,” Kennedy said. “They have explained that the wage hike is a job killer in their communities, and that eliminating the tip credit overwhelmingly supported by employees, would cut salaries that right now average $19-25 per hour.”
The Raise the Wage Act passed with a 231-199 vote almost directly on party lines in the Democrats’ favor. Although the bill passed in the Democrat-controlled House, it could face difficulty in the Republican-controlled Senate.
There are a few different scenarios that could play out in the Senate. The bill could be shelved and never come up for a vote. If a vote takes place, the Republican majority could defeat the Democratic vote. And even if the bill somehow makes it through Congress, it will arrive on President Trump’s desk where he is likely to veto it.
The battle to increase the minimum wage will most likely play out in the 2020 elections. Candidates on both sides will be campaigning for or against the increase. If the Democrats are able to take over Congress and the White House in the next elections, the minimum wage increase has a better chance of becoming law.