Saturday, November 2, 2013

It Is Time To Abolish The “Minimum Hourly Wages For Tipped Employees” (And Two Other Mandates To Help The Working Poor!)

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The Basics: Server minimum wage and workplace rules for tipping out other employees and buying uniforms undermine the intent of minimum wage law, keep hard-working servers poor, and should be abolished immediately.

Once upon a time, government was not treated as Public Enemy Number One. In truth, it was not a terribly long time ago that the United States Government actually worked hard to protect the citizens it governed. Back during the Great Depression, the United States Government stood up against the economic forces that were steamrolling citizens and leaving millions of people poor, homeless and dying young. While FDR’s New Deal programs took some hits from the Supreme Court, back in those days, the government acted as a force of good for the people and stood up to business interests. A few decades later, the Federal Government stood up again and again to pass Civil Rights legislation that worked to protect the rights of legally-disenfranchised citizens. The point here is that with the creation of the minimum wage, social welfare programs, and civil rights legislations, the United States government actually has a history of trying to protect its citizens from fear, poverty and abuse from corporate interests.

As I put the final touches on my revolutionary new economic theory (forthcoming next week!), I have become increasingly troubled by the legal safeguards to businesses that exist to the detriment of citizens. I recently explored how protecting the business interests of health insurance companies is actually a First Amendment violation (check out that article here!) and tonight I take on Server Minimum Wage.

What Is Server Minimum Wage?

I am an educated writer. I might only have a Bachelor’s Degree (in English), but I am well-read and I generally keep informed. Back during the Bush Administration, I ran for the United States House Of Representatives before it was popular or politically safe to speak out against the Bush Administration and its tactics. So, I was pretty shocked when, after thirty-two years of life, I was informed that there is a separate minimum wage for tipped employees.

If you’re like me, you might have gone out to restaurants for most of your life, tipping the appropriate 15 – 25% (or more for exceptionally good service) completely ignorant of the dependence those waitresses and waiters had on those tips. The word “dependence” is an accurate one. In all but seven states, tipped employees are subject to a reduced minimum wage (five states do not have any minimum wage laws and are guided by the Federal minimum wage). According to the U.S. Department Of Labor, the nationally-mandated minimum wage right now is a pathetically low $7.25 (a rate that the Housing Department has found will not allow a minimum wage employee to afford a fair-market apartment in any state of the union on one’s own!). Outside seven states and Guam, the Federal Government has declared the minimum hourly wage for tipped employees to be $2.13. The theory of the lower minimum wage is that the server or other tipped employee will make up the difference ($5.12/hr.) in tips and the wage and tips will average out in a pay period to at least $7.25/hr.

Of the forty-three states that allow a minimum wage for tipped employees (which I will henceforth be calling “server minimum wage”), nineteen of them use the federally-mandated $2.13/hour (Georgia tipped employees are “exempt” from the minimum wage law!). The highest server minimum wage is in Hawaii ($7/hr.), followed by West Virginia ($5.80/hr.). In most of the states that allow a reduced server minimum wage, servers count on tips in order to make up the difference between the server minimum wage and actual minimum wage.

Personal Digression

Having been married for years to a pretty fabulous woman who is an amazing waitress, I’ve come to develop some strong feelings on the server minimum wage. It is worth noting up front that my wife and I differ on the forthcoming theory. While she believes my latter two points are valid, she was of a mindset that it would be disastrous to abolish the server minimum wage. Her argument is that if people did not feel compelled to tip to make up the wages of the employees, they would simply stop tipping. Her argument is also that many servers would get out of the profession if there were no tips or they could not rely upon tips.

So, up front, let me say: 1. I am not advocating against tipping servers (tip your servers generously or don’t bother going out to eat at a restaurant where tipping is appropriate!), 2. As my argument will show, despite my wife’s assertions, tips are hardly a reliable form of income, and 3. If there was a great migration of servers out of the serving industry based on changing server minimum wage laws, there is a good chance it would aid the economy (though I suspect there is not a vast population of workers waiting to change out of a serving career based only on their tips; those who receive great tips now would likely still get great tips on top of their wages if the law was changed).

An Argument To Abolish The Server Minimum Wage

Since the creation of Federal and State-based minimum wage guidelines, Federal law has fallen very firmly to the benefit of businesses, as opposed to workers. One need only look at the creation of the server minimum wage to see how the law looks to protect business interests as opposed to workers rights. Tips are, by their definition, intended as a gift for exceptional service. Why, then, is there a minimum hourly wage for tipped employees? The answer is simple: it allows business owners to keep expenses down and compels employees to spend the “gift” (tip) as a wage. The tips come in and go out; the business owner records them, but often only pays a wage to employees in the form of tax withholdings.

The concept of server minimum wage is an inherently unfair one. By creating a separate class of employees, paid at a lower rate, the government and society are placing an instant value judgment on the work being done. Stocking shelves, working as a cashier, cooking food in microwaves at a fast food restaurant are all valued (by minimum wage law) more than serving food, interacting with customers, upselling and moving around on one’s feet for hours on end. Servers have a far more complicated job than legislators give them credit for: when they are waiting on tables, they are seldom waiting on just one table and they have to put up with demanding customers, ornery cooks, and management that is trained to undervalue them. Servers are treated as servants, babysitters, messengers, couriers, and cleaners . . . usually for multiple tables at once.

There might have been a time when server minimum wage made sense (I’m at a loss to believe there was a time when it was sensible to pay the people who bring you food and drink less than the guy who folds shirts at the Gap), but a recession is not that time. Politicians loathe using the word recession and there are specific economic conditions that must be met in order to declare a period a recession. When the economy is struggling, it is not the time to have a server minimum wage. The argument from politicians and businesses are that the economy needs businesses to survive and keeping labor costs low is essential. Business will always seek to keep labor costs low; expecting “the market” to raise worker wages based on ability and profitability of workers is like expecting a compulsive gambler to quit while they’re ahead or sharks to stop a feeding frenzy because they’ve eaten to physical capacity or any number of other things that would happen in a “fair” world that do not happen in ours. Businesses are exceptionally good at looking out for their own interests and the fact that so many politicians prioritize keeping businesses running over keeping citizens fed, clothed, and housed, is troubling.

When there is an economic downturn, recession, slow growth, it is exactly the time to do away with the server minimum wage. Economists (as opposed to humanists – the people who care more about people than business interests) will say that people using disposable income to go out to dinner or travel helps with stimulating the economy. The problem with this mindset is that it assumes all people who are going out to dinner are tipping, as appropriate, in order to cover the gaps in the server minimum wage. Experience has shown they are not. Cheap people, poor people, teenagers, and people who are on a fixed income do not tip more or as much when they themselves are strapped for cash (and/or are ignorant of the importance of tipping for paying the servers their wages). When the income tax refund comes and people in those demographics splurge, they seldom account for the tip. This was actually well-illustrated in Waiting . . . (reviewed here!) when the redneck diner takes his wife out for their anniversary and racks up a decent bill, but tips a pathetic quarter.

Those who fail to tip or fail to tip adequately do so at a cost to the server. Because the wages for the server are calculated with the expectation that the server is getting tips on each order and each hour, the underlying assumption is that the server is kept busy and satisfactorily delivers tipworthy service and that the customers are in a position to tip appropriately. But any one of those conditions not being met diminishes the servers rate of pay. The only one that the server controls is the service they deliver (and it can be tough when you’re harassed by the kitchen and demeaned by customers constantly). Unfortunately, delivering amazing customer service is not a guarantee that the other two conditions will be met (as is amply proven by the site my wife has become obsessed with, If You Can’t Afford To Tip, You Can’t Afford To Go Out And Eat!).

Conditions that are outside the server’s control can easily rob them of fair wages. How so? Let’s take a slow day. Let’s say on an uncommonly slow day, the manager overstaffs the restaurant and Waitress X ends up with only two tables in her section over the course of two hours. At $2.13/hr, she needs to make $10.24 in tips just to reach minimum wage. Table One is a pair of teenagers. They are on a cheap date, order the lunch specials, and rack up a bill that is less than $20. They’re young, inexperienced, and cheap and do not know to tip, but even if they did, the exceptional service Waitress X delivered would still only be worth $4 according to Federal calculations . . . which does not even get up to the $5.12 she needed to make that hour. But then, three businessmen come in and run Waitress X’s ass off for the second hour. They rack up a $50 bill, upon which they tip $10. $10 is still not $10.24, but the employer might shell out the $.24 they are supposed to to cover the difference in wages. Odds are, they would not have to; over the course of a pay period, the waitress might make up the difference through other tips . . . but she is only making her payroll for waiting on the teenagers because of the second table that came in. While she might have been tipped a fair amount for that table, the funds she earned are used to cover the lack of a tip from the other table.

In no other business are wages averaged out based on factors outside the worker’s control. In no other industry are sales (or deficiencies of sales) used to compensate for the base wage the worker makes. In other words, if you go into a big box electronics store, the workers are paid regardless of whether you buy the DVD they just stocked on the shelf or the video game they put out last week; their wages are not paid based on an aggregate of what customers spend over the course of their work week! It would be ridiculously complicated to do that, workers would not stand for it, and it would fundamentally undermine minimum wage laws. And the marketplace survives: it is the cost of doing business. Why, then, are restaurants, bars, and other service-based jobs exempt from the idea that they are valued (especially when they are usually much more interactive than in any other industry!)?

As well, servers wages can be dramatically affected by promotions outside their control. For example, many restaurants offer free meals to veterans on Veteran’s Day. No one would dispute the great sacrifices our soldiers, officers, enlisted personnel and other military staff make for our country. However, the promotion – which usually comes with a management demand for all hands on deck from serving staff for the busy day – is inherently unfair to tipped employees. If your bill is 0% or the cost of one meal for two (or more!) people at a table, the tip (if any) is disproportionately low for the server. 20% of 0% is $0. That means servers will work on Veteran’s Day, many without making tips or making far fewer tips than the amount of work they will do that day. Will the business make up the difference in wages? Most won’t; they will basically eat the surplus tips from other days in the pay period against the Veteran’s Day deficit. So, in addition to bearing the transport and time expenses of going into work, servers will likely bear an expense against prior or subsequent earnings to pay for their day’s work! Veterans have every reason to complain about the way they are treated after serving, but why should they treat servers as poorly?! Similarly, all coupons, happy hours, and specials reduce the server’s ability to make their wage while increasing their workload.

Server minimum wage invites abuse. Most servers are not legal scholars; they are working for minimum wages averaged over their workweek and they are largely un-Unionized, working without contracts, for employers who are institutionally valuing them less (cooks are protected by minimum wage law, while servers are paid 1/3 minimum wage!). So, if a server has a bad week and is undertipped and the employer does not pay them fairly to make up the difference to minimum wage, the server is seldom in a position to notice or have a reasonable mechanism to protest (and, given “right to work” laws, keep their job!). It is exceptionally easy for employers to avoid paying servers actual minimum wage (as they are legally obligated to do when the tip amounts do not average out to the actual minimum wage) when the tips fall short.

Moreover, workers paid bi-weekly can easily have deficits in their wages taken out of subsequent weeks! If a restaurant pays bi-weekly and a worker has one terrible week and one great week, it is very easy for the employer to make up the deficit from the bad week with the good week’s tips, though legally, that is not permitted.

Finally, the tips on paper are seldom indicative of the accurate wages the employee is making (see below!). Regardless, bookkeeping and paying wages are not what the server signed up for when they took a job in the service industry. On top of all their serving responsibilities, they should not be responsible for acting as a watchdog on the management of the facility at which they serve. Workers paid a steady wage or a fair, steady wage plus tips are not burdened with the worry that comes with depending upon the generosity of strangers or the additional watchdog responsibility that servers today have.

Why Eliminating The Server Minimum Wage Is Imperative

There are three key reasons to eliminate the server minimum wage: Integrity of minimum wage law, cultural benefits, and the business benefit.

Congress is exceptionally good at looking out for businesses; there are loopholes in the Affordable Care Act that encourage employers to keep workers at part-time and pass the financial and administrative burdens of health care onto the workers. Financial institutions are not comfortable with variables; server minimum wage undermines the worker’s ability to get car loans, mortgages, and pay other fixed bills. By having a separate class for servers, the government is codifying a division in the workplace that makes it inherently more difficult for individuals in the service industry to enjoy the benefits of employment. Minimum wage is barely a livable wage (it probably is not a livable wage for a single person anywhere in the nation); having a reduced minimum wage that can easily be lower than minimum wage undermines the philosophy of minimum wage and makes it more difficult for an entire industry of workers to be financially independent.

There is a huge cultural benefit to abolishing the server minimum wage as well. Servers are absolutely dependent upon tips right now in order to make their basic wages. If a customer is an asshole to them, they grin and bear it (more often than not) on the faint hope that the person who is treating them poorly will come through at the end and tip appropriately. This is an utterly unrealistic expectation. But, more than that, it encourages the asshole to continue to be an asshole and it entirely demeans every server forced to wait upon them. With a set basic wage, good servers need not put up with shit from assholes (that’s a sophisticated argument, I know, but bear it out); if you’re an asshole and come into a restaurant and treat your servers with disrespect, then you get your food and nothing else. Don’t tip, fine: your server is prioritizing the nice people who will treat them well and hopefully tip them. If you’re an asshole who is smart, you get the hint to stop treating servers poorly; if you’re an asshole and an idiot, you get poor service everywhere you go every time because of how you treat waitstaff. Eliminating the server minimum wage reduces the stress on servers and encourages jerks who want to go out to eat to treat their servers better (even if that is not reflected in tips).

Finally, there is a business benefit to abolishing the server minimum wage. While managers and business will complain that raising servers to at least minimum wage will cost them money (every business seeks to reduce labor costs – management loathes paying workers, but it is an expense and the cost of doing business and relying upon others to execute the vision they have for their business), they neglect the benefit. The government has a great incentive; higher pay rate for servers means more tax dollars (they can tax the hourly wage and the tips the worker receives!) for the governments to collect. But on the business end, having a higher labor rate inspires the managers to run the business more efficiently. Managers who place more value on their employees (reflected by rate) encourage them to staff appropriately, train adequately, and retain to their best benefit. If you are paying your workers more, you are less likely to overstaff during the slow times. You will want your workers to be trained to upsell and do their jobs better to encourage return visits. You will retain the most competent workers, as opposed to the cutest. There are business benefits to compelling business to raise their wages, especially for servers.

Server Minimum Wage Is Seldom An Accurate Reflection On Worker’s Wages

Finally, there are two aspects that legislators did not (adequately) consider when they conceived of and ratified server minimum wage: tip-outs and uniform expenses.

Tip-outs, for those not in the know, are financial obligations servers have to other personnel in the restaurant. A server in many establishments is expected to share their tips (even in places that do not pool tips!) with other workers at their establishment. So, a waitress may be expected to give a cut of their tips to bartenders (whether or not their customers ordered beverages the bartender prepared!) and server assistants. Server assistants are the employees who might clean up spills, clear tables, and seat customers for the servers. They are usually paid a higher rate than servers and their job is a catch-all . . . but that is what they are paid to do. Servers might be expected to tip-out to server assistants (2.5 – 5%) and bartenders (up to 10%) who are serving during their shift regardless of whether or not their services were used or how those personnel actually facilitated the orders. In Waiting . . ., as an example, the server assistants are characterized as two guys who spend the whole time getting high and seldom actually doing their jobs. Regardless of their competence, such employees are entitled to a fair wage of their own . . . one that the employer should be paying, not the servers.

To make matters worse, many places require tip-outs based upon the bill, not the actual tips. So, in our example above, when the teenagers spent $20 (but did not tip) and the businesspeople spent $50 (and tipped $10), Waitress X had to tip-out $1.75 to the server assistant and $7 to the bartender. So, the $10 tip that was supposed to make up the $10.24 wage deficit is now a $1.25 tip against the $10.24 deficit. The server literally paid the server assistant and bartender for the teenagers to have lunch in the establishment! It is utterly ridiculous to mandate that servers tip-out to their co-workers and to do so based on money they may not have actually received (the tip-out would have been about five cents to the server assistant and a dollar to the bartender if the tip-out was based on actual tips received!). Servers are not in the business of employing the bartender or server assistants; they should not bear the responsibility for their payroll. Having servers tip-out is like Bill Gates expecting the software engineers at Microsoft to pay the marketing department workers whenever the engineer writes a successful line of computer code.

Tip-outs should be abolished by law; if servers want to share, that should be their free will, not a condition of their employment at a facility.

Finally, servers are frequently screwed by the expense of uniforms. Many corporate work environments require a set uniform. While they might provide a shirt, they often require other uniform elements that are not provided for, either in materials or budget. Black pants, for example, are not free and anyone coming off being unemployed cannot be expected to show up to work when there are instantaneous expenses. Many servers have to buy their own aprons, pants, non-slip shoes, as well as have their own “bank” (cash on hand to make change for customers . . . which is not provided by the business! They always have to have $20 plus change just to show up at work!). These uniform requirements might be reasonable, but there is nothing to stop them from being ridiculous; at least one chain restaurant requires servers to wear a belt, despite the fact that their belt area is always covered by a bloused shirt bottom and an apron! Why should the workers bear the uniform expenses, especially when they are paid a reduced minimum wage?! The simple answer is that they should not! Uniform requirements would be much more reasonable (or easy to swallow) if those who are paid the least in the company did not bear the expense of them. Uniform requirements where neither uniforms, nor an adequate stipend for uniform purchases, are provided is an unfair burden on the workers.

What You Can Do!

For a change, this article is not only academic, it is interactive! Below is a simple form letter. Copy and paste the letter into your e-mail and send a copy (filling in the appropriate blanks) to your State AND Federal legislators. That’s your State Senator, State Assemblyperson, two Senators in the U.S. Senate, and one Representative in the United States House Of Representatives. Five e-mails to the five people who represent you in the bodies of government that can get this done. Then, please share a link to this article with all of your likeminded friends (or those who you think could be convinced by it!). The URL in your browser at the top can be copied and pasted into an e-mail to friends, family, and coworkers! Spread the word and we can make change!

Form letter to your legislators (cut and paste the following to e-mail to your legislators):

To The Honorable [insert name here];

The separate minimum wage for tipped employees is an unfair classification that puts undue burden on the finances and wellbeing of our servers and other tipped employees. Businesses that employ tipped employees should bear the responsibility of paying fair wages to their employees, instead of receiving government protection to pay them less.

To that end, I would ask you to sponsor and/or support legislation to:
1. Abolish the minimum wage for tipped employees and ensure tipped employees earn minimum wage plus any tips they receive,
2. Make tip-outs or any other form of payment that requires tipped employees to tip other employees at an establishment illegal, and
3. Make all required uniforms dictated by a business the financial responsibility of the employer. If an employer dictates a set uniform, they must provide or pay their minimum wage employees a stipend to get the uniform components.
Thank you for acting as a champion for the working-class!

[insert your name here]

© 2013 W.L. Swarts. May not be reprinted without permission.
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