As a progressive-minded Minneapolis business owner and resident, I would like to weigh in on tip credits as relates to the push toward a $15 minimum wage in my city. Therefore, while I believe strongly in a fair living wage, I would like to make a couple of points:
1) For strict hourly employees, I believe $15 can be achievable. However, every time our company attempts to get to an overall $15 minimum, we are forced by the state to increase the hourly wage of our highest-paid employees — our servers — who gross more in a year than our highest-paid managers. That sucks a huge amount of money out of the pool to pay strict hourly employees. It is counterproductive to our ability to achieve a fair living wage for all.
2) There needs to be a calculator for a “super wage,” or whatever you want to call it. This “super wage” represents the overall earnings of employees who have a base wage, supplemented by other compensation such as tips or commission.
I have documented evidence that many of my “minimum”-wage employees have actual reported income of $45 to $62 per hour! I am required by law to administer and report this income and deduct all the taxes from it every pay period. These are people well into the middle class whom we do not want to harm. They work for me because they can make this kind of overall income, not because they can get paid minimum wage, whatever the rate. If a higher minimum wage passes without a “super wage” credit, it will cost just one of my restaurants more than $100,000 to increase their wages — money that could be better directed toward paying my strict hourly employees a better wage. It would turn my restaurant upside down and cause me to change the current model. These well-paid, tipped employees would see an approximate 30 percent wage reduction in their current wages because it would force me to charge a service fee (up to 20 percent) in lieu of tips so I could distribute fairly to all. That would be in addition to a menu price increase of at least 10 percent.
These employees have done nothing to deserve such a fate, but I see no other economic recourse. It would change service standards and increase consumer pricing significantly. It would be unfair across the board — to employees, owners and, ultimately, consumers — if government refuses to recognize the importance of and necessity of tipped income.
I love that these employees do well and live squarely in the middle class with homes and mortgages based on this income. Do we want to raise people from the bottom at the expense of our middle class? Why should they bear the burden of this kind of social engineering? By looking at the entire picture of an individual’s reported wages within the company and setting a threshold, you can make an increased minimum wage applicable to those who don’t receive enough tipped income and to those truly making less than $15 per hour while maintaining the good incomes that many servers in this city earn.
3) Since my industry makes, on average, less than 5 percent profit, any wage increase needs to be phased in, as has happened recently with the state minimum wage. Increasing hourly employees who make less than $15 to the new minimum all at once would be catastrophic to most restaurants in my industry — many that pay more than $9.50 but less than $15 to a substantial number of their workforce. This affects a lot of employees and would virtually remove all profitability from all restaurants, so I would suggest a measured approach.
It is important to consider the impact of change like this at the municipal level at a time when we have a lot of risk-takers starting up small businesses in neighborhood nodes that had been languishing. The city is thriving because of these small businesses and their resulting job creation. I urge the city of Minneapolis to tread cautiously and consider all the ramifications of this action, more than I mentioned here.
Molly Broder is the restaurateur of Broders’ Cucina Italiana, Broders’ Pasta Bar and Terzo in southwest Minneapolis.