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DECEMBER 2001
We Need to Protect the Minimum Wage
by Rick S. Bender, President of the Washington State Labor Council, AFL-CIO

The next time you go out to dinner, take a minute to think about the person who will serve you your meal.  Most likely your server will be a woman. Most likely she will be a single parent.  She will probably work part time, maybe on a split shift, pulling down anywhere from twenty to thirty hours of work a week.  She will probably have to depend on the tips she gets to make ends meet -- to help pay the rent and put food on her table.  When you think about her, consider the tip you might put on the table. That tip is called a gratuity at the fancy restaurants, because we are supposed to give it in gratitude for good service. We lay it on the table and leave, assuming that our server will benefit.

Most waitresses earn the minimum wage. Tips can make the hard job of serving hot meals and keeping customers satisfied a living wage. Our state’s minimum wage is $6.72 an hour. That rate rises slowly, linked to the rate of inflation. When our state’s voters passed Initiative 688 a few years ago, with a 66% “yes” vote, they showed their support for the principle that no one should work full time and still be doomed to a life of poverty.  But even with the link to the cost of living, full-time workers in minimum wage jobs just barely make it.

Restaurants are in a notoriously difficult business.  New restaurants fail at a very high rate.  The restaurant industry attracts creative, talented people who work very hard to make a living. It’s tough to make a decent profit, and the business is always sensitive to local economic conditions.  When consumers cut back spending, the meal out at a nice restaurant on Saturday night is often one of the first cuts made.  Even given that set of circumstances, does it make sense that the restaurant owners get to dip into the tips of the waitress who works hard for them?

Misery may love company, but it seems to me that “tip credit” is a device that creates more misery than relief.  The Washington State Restaurant Association argues that since the industry is so fragile, and since the minimum wage is linked to inflation, there should be a loophole cut into our state’s voter-backed minimum wage law.  That loophole would work like this:

When a waitress adds up all her tips for the day she reports the total for federal income taxes.  With a tip credit, her paycheck will have another deduction—for her employer.  So for every dollar in tips she earns with her good service and hard work, her employer will pay her one or two dollars less per hour of work.  She could end up with a paycheck that zeros out her earnings, and she might end up working just for tips.  In states like Texas that have a high tip credit, some employees actually end up “in the hole” when they get their “paycheck.”  They actually have to pay their employer to work!

Personally, I find that outrageous.

But there’s more!  When a tip credit reduces a waitresses’ paycheck, there’s also a reduction in the Social Security and Medicare premiums that are based on wages.  Yet another reduction will be the premium paid for unemployment insurance.  These cuts mean if she loses her job, her unemployment benefit check could be reduced.  And if she is nearing retirement, her Social Security check might also be lower.

The agricultural industry has now lobbed a similar attack against our minimum wage law.  At legislative hearings recently, agricultural representatives promoted a plan to cut out farm workers from the indexed minimum wage.  Who will be next to claim their survival depends on reducing their employees’ wages?  Retailers?  Gas station owners?  Day care operators?  The hotel industry?  You see where this goes.

There’s got to be a better way.  In most segments of the economy, when economic distress becomes too severe, the industry turns to its state government for assistance.  In the forestry and fishing industries, the state has provided millions of dollars in tax relief and job retraining benefits.  The aerospace industry has also lobbied successfully for direct tax relief in past recessions.  I am not promoting a tax relief package for the restaurant industry, but I do suggest tax adjustments might make more sense than cutting workers wages, especially the wages of minimum wage employees who depend on tips.

Our state’s minimum wage standard was adopted by the voters just a few years ago.  The message from the people was clear:  Workers should not be forced to live in poverty when they work full time.  Americans area hard working people, we are also a fair people.  That’s why we agree that the minimum wage should not be undercut.

Rick Bender is President of the Washington State Labor Council, the largest labor organization in the state.

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Copyright © 2001  Washington State Labor Council, AFL-CIO