By Shane Madden
Michigan service staff rejoiced, collectively celebrating what would be the only raise they’ve ever received as a restaurant service employee.
After the COVID-19 pandemic wreaked havoc on the industry, putting millions out of work, it left millions more wondering where they could possibly get a $5 margarita. Inflation and gas prices squashed sales as customers cinched their belts to ride out the storm. There was finally a glimmer of hope, if only for a moment.
As of July 29, 2022, Michigan Court of Claims Judge Douglas Shapiro has granted a delay in the court’s decision to remove the state’s tip credit law, which allows employers to pay as little as $2.13 an hour to tipped employees and credit the rest to gratuity. This results in a majority of service employees not receiving a paycheck at all, as any accrued hourly income goes toward taxes.
Shapiro wrote in his decision that the stay would allow restaurants “more time to adjust” to the new changes, which will now be pushed back to Feb. 19, 2023 (at least).
That seems completely reasonable, at first glance. However, it doesn’t tell the whole story.
This decision is already four years in the making. See, Michiganders collected enough signatures in 2018 to put a $12 dollar universal minimum wage and paid sick leave on the ballot in November. Quickly realizing they couldn’t possibly keep those initiatives from passing due to their immense public support, the state legislature used a bylaw to pass the initiatives outright. It was a big win for the labor movement and the middle class!
Except those aren’t the laws they passed.
On July 19, 2022 a state judge ruled that the Michigan State Legislature violated the Michigan Constitution in 2018, when they adopted the proposed initiatives and immediately set to amending them. This dropped the wage from $12 to $10.10, removed annual inflation adjustments as well as language specific to tipped employees.
Per the judge, “the process effectively thwarted the intent of the people and denied them the opportunity to vote on whether they preferred the voter-initiated proposal or the legislatures suggested modifications.”
So, do they still need more time? Let’s talk about the time they’ve had and what they’ve done with it.
The tip credit was codified in 1966 as part of the Free Labor Standard Agreement (FSLA), and in 1991 was reset at $2.13 an hour, tied to 50% of the then minimum wage of $4.25, and though that wage has now risen to $7.25 nationally, the tip credit limit remains at $2.13.
That’s 56 years of not having to compensate service employees. Those profits have the industry exploding and expanding.
In 1990, manufacturing jobs (objectively better paying jobs with benefits and union protections) outnumbered restaurant jobs 3-1. Those numbers evened out in 2020, as 25% of manufacturing jobs have disappeared due to automation, and the restaurant business has grown by 50%, becoming the largest and fastest growing industry in the U.S. We are pushing people out of solid jobs into an industry of exploitation.
In addition to not being paid an hourly wage, servers and bartenders are subjected to forfeit between 3-5% of their sales as “tip-out” for other employees. When you take money out of one employee’s hand to subsidize another, it should be viewed as an establishment’s admission that they aren’t paying enough for the work that is required.
There are those that view this as a complete non-issue. They say these are jobs for high school kids, and “if you don’t like the wage then just quit.” But according to zippia.com, the average age of a food service worker in the USA is 35 years old with an average “salary”–or accumulation of tips–of $27,000 (note that this number is entirely at the mercy of the customers’ generosity). If this is the largest and fastest growing industry in the U.S., manned by a large percentage of adults, that means they are the jobs that are available to Americans.
We either have to decide that these jobs are worthy of a living wage or accept that our favorite restaurants will be forever short-staffed. That might mean accepting small price increases and/or acknowledging that tipping is a part of the experience. It might also mean realizing that maybe the U.S. doesn’t need a million restaurants and we should let the bad ones close.
Whatever the case, if paying workers a fair wage means a restaurant has to raise prices or die, so be it. That’s the whole point of the free market. It is far past time for an establishment to take responsibility for paying its employees and not passing the buck to the customer, or worse, leaving their employees empty handed.