I'll have more, (no doubt!), to say about the proposal to increase the minimum wage to $15 an hour (spoiler alert for those who haven't been watching along at home: Increasing the minimum to a questionably livable level is imperative yesterday), but here's what I think of the so-called "tip credit"/"tip penalty" (the idea, in essence, that restaurants and bars shouldn't have to pay the full minimum wage because their workers make more than the minimum, overall, thanks to tips): If I were Czarina/Dowager Countess/High Priestess of Seattle, here's how the system would work:
1. $15 (or higher! A $15 minimum, assuming full-time work and no overtime, works out to $2,600 a month—enough, under federal standards, to afford a $780 apartment, which amounts to $440 less than the Seattle median) minimum wage. For everyone, no exceptions. As long as we're dreaming big here, let's get rid of the idea that restaurant workers are in an entirely different economic category that renders them undeserving of a decent living wage without unregulated and arbitrarily determined subsidies from customers.
2. No tip credit. In fact, no more tipping. As long as we're dreaming big here, let's get rid of the idea that service workers are in an entirely different economic category that renders them undeserving of a decent living wage without unregulated and arbitrarily determined subsidies from customers.
Fundamentally, any economic system that relies on tips—i.e., the charity of individual customers, based on fairly arbitrary factors like their mood, opinion of an individual waiter's comportment, and their willingness or ability to pay—to ensure that workers can pay the rent, is fundamentally broken.
Additionally, as numerous studies have shown, people vary their tips based on factors like race, gender, and body language—quality of service, as it turns out, is hardly a factor in tip decisions, making the argument that "service will decline" at restaurants without tips (as opposed to the many, many other service industries where tipping isn't customary in the U.S.) pretty specious.
3. Higher prices (yes, even if tipping doesn't go away, which it obviously won't.) As a person who can afford to eat out once in a while, I'm willing to pay higher prices to offset higher wages for waiters, bussers, and other kitchen staff. Not infinitely higher—in a Puget Sound Business Journal story yesterday, Tom Douglas estimated that his prices would increase only about $5 per check if the minimum wage increases from $9.32 to $15—but enough to cover restaurateurs' increased costs.
And frankly, I'm skeptical that prices would go up even that much: As people who used to make minimum, or sub-$15, wages, are able to spend more money on things like dining out, the customer base for restaurants like Douglas' will increase, boosting profit margins and improving the local economy as a whole.
When you have a little extra at the end of the month, that money is likely to go back into the local economy, making a wage increase a win-win even for the small businesses that will bear more of the initial brunt of a higher minimum than big corporations that can afford to spread the burden across their national infrastructure.