Minimum wage ‘tip credit’ idea gets cold shoulder

Some restaurant owners said last week that paying tipped workers the same minimum wage as back-of-the-house staff would increase inequity in the food service industry. Others spoke up this week saying no other California city takes this approach to restaurant wages, and that Berkeley shouldn't be the first. Photo: D.H. Parks

Some restaurant owners said last week that paying tipped workers the same minimum wage as back-of-the-house staff would increase inequity in the food service industry. But tipped workers and labor advocates said this week that no other California city takes this approach to restaurant wages, and that Berkeley shouldn’t be the first. Photo: D.H. Parks

As volunteer Berkeley commissioners grappled this week with how to approach a request from the mayor’s office to help craft a new minimum wage policy for the city, many were in agreement that setting special parameters for tipped workers is not the right approach.

Last week, at a Berkeley Chamber of Commerce meeting, restaurant association reps and local business owners said they hope the city will consider a different — likely lower — minimum wage for tipped employees. Some cities have taken that approach to account for servers who are able to bring in large amounts in gratuities. But opponents of the tip credit say it doesn’t exist anywhere else in California, and that Berkeley shouldn’t be the first.

A Berkeley City Council recommendation to the city’s Labor Commission asked the volunteer panel in April to create a new minimum wage law for Berkeley that is modeled on San Francisco’s ordinance, which went into effect last year. Mayor Tom Bates also asked the commission to consider setting a special rate or rule for tipped workers. That request was added to the original proposal shortly before the council vote, and was an attempt by the mayor’s office to let local business owners know he was aware of their concerns.

Several advocates and workers who attended a Labor Commission subcommittee meeting Tuesday said that setting a “tip credit” to set a lower wage for tipped workers would be both messy and unfair. The subcommittee is made up of three members of the Labor Commission — Irene Yu, Angus Teter and Steve Kessler — and plans to meet every two weeks to discuss the minimum wage ordinance. (Scroll down for details about future meetings.)

Berkeley resident John Elrod, who works in San Francisco as a bartender, said during the meeting’s public comment period that he has followed similar labor issues in nearby cities.

“The idea to carve out an exception for tipped workers would be penalizing people who already are reliant on the kindness of others to get by,” he told the panel. He said many tipped workers are required to share their tips, either via a pool or with other staff members in different ways. “To exempt the tipped workers who are already having to share their money seems draconian. Just because you have a cup on a bar or counter doesn’t mean you’re going to get a lot of money.”

Elrod said it can be a “very slippery slope” to figure out or mandate who actually qualifies as a tipped worker.

One tipped worker, Kayvan Sabeghi, who lives in Oakland and works as a server in Emeryville, said he has to “tip out” the bartender, kitchen staff, the person bussing tables and others.

“My paychecks are small and my bills are get bigger and bigger every month,” he said. “I’ve always had a roommate. I’ve always worked other jobs, sometimes two to three jobs. It’s not enough money to live on, even at $12 an hour.”

Workers said, in many cases, even though they’re tipped, they’re still not making much.

One woman, a Subway employee, said the four or five people on her shift split the money in the counter tip jar, and tend to make $4-5 each in tips for a whole shift.

“Sometimes we even split the quarters,” she said.

Wei-Ling Huber, an organizer with labor organization Unite Here, said, if Berkeley does set up a tip credit, it would be “a major step backwards.” She said, even if Berkeley follows San Francisco’s example and sets the minimum wage at $10.55 an hour, it won’t go far enough.

“I don’t even think it’s close,” she told the panel. “I don’t think it goes far enough but I support the idea of going forward with the minimum wage because that’s where we’re at today.”

Wednesday night, the full Labor Commission met for an update on the three minimum wage subcommittee meetings that have taken place so far. Commissioners did not take a formal vote, but seemed largely in agreement that they do not want to set special rules for tipped workers.

“I would hate to see Berkeley, with its progressive history, take a position that seems to be anti-progressive,” said Commissioner Wendy Bloom.

Commissioner Yu concurred, noting that the subcommittee had already heard lengthy discussion on the idea of the tip credit. The credit, she added, struck her as an “invalid” idea given the research and reports the panel has heard thus far.

“It’s taking way too much time from what we’re doing,” she said. “We’re still opening the floor for people but I think we should start shifting our focus.”

Commissioner Angus Teter said issues still to be hashed out are the recommended starting dollar amount for the minimum wage; how it will be tied into the cost of living or Consumer Price Index; the schedule for phasing it in; how to handle complaints and enforcement; and how to take into account employer concerns.

Teter said he’d like to see the information-gathering phase of the commission’s work on the minimum wage end in late August, with a draft recommendation to the City Council in September. After that, the city could collect feedback, and the council could potentially make a final decision in December.

The commission did not vote on the time line however, and there was some discussion about the scope of the work to be done. One member of the panel advocated for a much broader approach.

“I want to use this as a way of talking about poverty and enlarge the issue, not to expedite things so they can simply get something passed,” said Commissioner Kessler. “This is a way of opening the larger question of impoverishment. And what better place to do it than here?”

Several commissioners responded that, while they liked Kessler’s concept, they believe the group needs to stick more closely to the minimum wage ordinance, and set a clear time line for moving forward.

Saru Jayaraman, co-founder of the Restaurant Opportunities Centers United, and author of “Tipped Over the Edge,” a report about how tip credits inequitably affect women, said Thursday that there’s a huge amount of momentum in many places around the country to raise the minimum wage.

And, though many restaurant and business owners say they fear they won’t be able to afford the increase, extensive research doesn’t bear that out, said Jayaraman, who runs a UC Berkeley-based research center on food labor. Owners may need to get informed about how to work a higher wage into their business plans, and “create efficiencies so they can provide better wages,” but that can be done via training.

“These concerns come up only because they’ve been following the standard of the National Restaurant Association for so long that they haven’t been taught or trained how they can do it differently. And that’s what we can provide,” she said. “The truth of the matter is, there’s really no reason for any business to have to fail.”

The Labor Commission subcommittee on the minimum wage will meet Tuesday, July 2, at 10 a.m. and Tuesday, July 16, at 3 p.m. The full Labor Commission has scheduled a special meeting for July 24 at 7 p.m., which will include the minimum wage on the agenda. Follow updates from the Labor Commission via its city of Berkeley web page. Those who are interested can sign up to receive email updates when new information — such as minutes from past meetings and details about future meetings — are added to the page. 

Berkeley considers city-wide minimum wage hike (06.18.13)

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  • The_Sharkey

    One woman, a Subway employee, said the four or five people on her
    shift split the money in the counter tip jar, and tend to make $4-5 each
    in tips for a whole shift.

    “Sometimes we even split the quarters,” she said.

    In cases like that, perhaps it would make more sense for workers in low-tipping situations to get rid of the tip jar altogether so that they could be eligible for the higher level of minimum wage.

    But “tip credit” or not, my opinion is still that setting a city-wide minimum wage that’s significantly higher than that of very close neighboring communities at a time when we’re still having lots of workshops on trying to figure out how to bring businesses to Berkeley is pretty stupid.

  • Andrew

    I read an article just this morning outlining why we should do away with tipping. That it’s not good for anyone – staff or customer – for a number of reasons.

  • Mfox327

    Restaurants need to do away with tipping altogether, raise their prices a certain percentage, and pay all of their employees an appropriate wage/salary just like every other industry. To those who say “but then we’ll have horrible service,” that’s just not true. I’ve dined recently in France and Japan where tipping is not customary, and had service on par or better than I get here, especially better than I get in San Francisco.

  • Mfox327
  • Andrew

    Yes, I was referred to it through another blog post.

  • Mfox327

    Yeah, I saw it as well. While I don’t really like that blogger’s writing, I agree with the general point she’s trying to make.

  • gt

    This should only affect full service restaurants as in ones that have a server that serves you at the table, but with that said the server tips out a small portion to the buser and runner sometimes even the kitchen now i think those positions should still get the min wage bump. This is a very tricky thing to figure out how to do right.

  • Truth Sayer

    My objection to tip sharing is that according to laws in all states, management is responsible for pay and benefits. Applying the tip sharing concept, the recipient is not a management official, therefore should not have anything to do with the pay of other hourly wage employees. Some questions are:
    If an employee does not share required portion of tips, would or could the employee be charged with theft?
    If the server is working hard and diligent, and the individuals s(he) is required to share tips with are shirking their duties, why should the server share the tips?
    If I am a kitchen worker, why should my pay be based on the honesty, or perceived honesty of the server?
    Some businesses require servers to share tips with the bartenders. Why should they, when many customers will give a tip to the bartender that is unknown to the server.
    Why should management employees (the boss) be included in the tips provided by the customers?
    Finally, please do not feel offended by my comments. I only raised these issues to suggest possibilities and the unfairness of tip sharing, not to accuse anyone of being dishonest. Regardless if I a with my family, or on a business trip, I always tip well, as I vividly recall working in a restaurant in my youth and receiving very little pay for my hard work.

  • Epic

    ”The truth of the matter is, there’s really no reason for any business to have to fail.”
    EASILY, the most ridiculous sentence I’ve read in a while.

  • guest

    Per usual Berkeley has a concern, but no plan…an imagined wrong to be righted, but no understanding of how. In the future these “commissioners” will be pilloried in the median across from the Cheese Board.

  • Hildah

    Clearly you have never worked In a restaurant. Bartenders should be tipped out by waitstaff, their livelihood depends on it. Good bartenders make a great living not from wages, from tips. When a restaurant owner sets up wages for staff he takes into account the tipping factor, this cannot be changed overnight. If and when the minimum wage is raised and there is concern about those that work for tips, simply raise their current wage by the same percent. Why is this so difficult? FYI the tipouts are just 10% of the waiter’s tip.

  • Bill N

    This won’t work for a small city like Berkeley. The only way it will work is to make it a statewide law.

  • Truth Sayer

    You demostrated your ignorance by contradicting my statement without knowing me, or even a single fact. I call that a lot of brass, or should I say BS. I worked in a restaurant as a teenager after school and on Saturdays in the early 60’s in Ohio. I never said I was a bartender, as the restaurant did not serve alcohol. I was a dishwasher and busboy. You must also be young, and obviously were asleep in history class or paid no heed to people who lived the history that you know little about. The laws and rules governing wages and tips were a lot different in the 1960’s, or certainly were never enforces. Your so-called “tip outs” did not exist in the 60’s. In fact, if a dish was broken, many restaurants took it out of employee’s pay. The reason for my previous comment is that while traveling on business for many years, and eating in restaurants, I saw people verbally abuse servers, touch them inappropriately, or leave a paltry tip, This and my earlier years reminder of how fortunate I was to have a good career with retirement and benefits. In the future, please know the facts before denouncing someone’s statement.

  • Hildah

    Having worked in a restaurant in the 60s when you were a teenager demonstrates your ignorance about working in a restaurant in the 21 st century. Believe or not, many restaurants offer health benefit packages to their staff, probably not most since restaurant jobs are something people work at temporarily
    like you when you were a teenager. I can denounce your statement and you can denounce mine . This is a discussion about wages not about you.

  • Pwll

    People should not have to be reliant on tips. Restaurants should pay their workers a decent wage and up their prices saying prices include gratuity. Then we wouldn’t get into ridiculous quandaries like this one. Servers have already figured out how to even things out with the kitchen workers by splitting the tips.

  • Truth Sayer

    First you dispute me working in a restaurant, then you state “This is a discussion about wages not about you.” You obviously have not been out of California working, otherwise you would have known that most restaurants in this country do not offer health benefits (This includes fast foods and pizza workers). A great many are part time employees, which excludes them from health benefits. Those employers who do provide health benefits, do so only if the employee pays an astronomical portion of the benefits. So your statement of “many restaurants offer health benefit packages” is deceptive, and for the most part, outright untrue. Finally, You mentioned my”ignorance about working in a restaurant in the 21st. century.” You are completely unaware that based upon the cost of living in the 60s and now, compared to the pay and benefits provided to restaurant lower tier employees in the U.S., it has not gotten better. The average personal income is now $42, 693. In 1960 it was $4,080. This represents a tenfold increase in pay. Lower tier restaurant employee’s pay in the U.S. has not increased ten times like the rest of the population. Even thought the cost of living has gone up. Bottom line: technology has changed the menu, food distribution, payment method, and a few other things. But pay proportionally to the cost of living in restaurants, is lower than the 1960’s. It was always about restaurant worker’s wages, I hope that you can see the comparison.

  • Hildah

    You are the one making assumptions . Most of my life has been in NY and MA. I have lived all over the world and speak 4 languages. Never been a tourist only a traveler. So if you want facts, get real. I have both worked , as an adult, and owned an eating establishment. Been in the tourist business and in the arts. What I have not done is sat on my behind in some safe job that insured me benefits or pensions, I am not complaining I am happy to have lived. All I am trying to convey is that it is not realistic to pay waiters, bartenders, I am talking about “sit down table service ” restaurants, the same minimum wage one would pay a clerk, sales person, dishwasher, etc. I believe we need to raise the minimum wage but for restaurant servers their wage shoul rise by the same percentage as the others. They should continue to collect tips because there is no way that a restaurant owner can pay the wages they make including their tips. It is not realistic. FYI Alice Waters has benefits for her staff. If you don’t believe me, go ahead and ask. Stop being such a sourpuss.

  • 3rdGenBerkeleyan

    T.I.P.S. = to insure proper service… people forget this and expect tips even when given poor service… i tip 15% most of the time and a lot more when i get good service so the message is if you want to make more money do your job and remember the customer is always right suck up your pride and say yes sir or yes mam and remember you are in the SERVICE industry!

  • guest

    > we need a higher minimum wage in the City of Berkeley than the state
    >we can’t have a tip credit in the city because the state doesn’t: it would be too complicated
    Am I the only one who sees the inconsistency here?

  • Truth Sayer

    If you read what I stated about pay and pay and benefits has risen for average Americans 10 times since the 60s, but very little for restaurant workers, I see no disagreement in our opinion that these employees are on the bottom rung of the American economic ladder. I am against shared tips for the reasons I initially stated. And, as a customer, It is my intent to give it to the server for his/her services. I like the ideal of a minimum automatic gratudity. Especially for large groups of guest. As they as a group tip very little per person. A classic example is, while staying in a hotel Florida, a large group of little leaguers (It was the play-offs) , with their coaches used the hotel restaurant facilities. They did not buy anything, as they brought in their food in from a fast food chain . Their loud noise and talking kept other guest out. And, they left the place in a mess, which the servers had to clean up. The restaurant manager should have charged a minimum for the benefit of the servers, or denied them the use of the facilities for food purchased elsewhere.- But they did not. I think we do agree. thought it took a while :-)

  • guest

    See below…Truth Sayer vs. Hilda = Godzilla vs. Mothra!

  • guest

    I think we should be able to ignore reality and suggest things which magically come true.

  • Truth Sayer

    Of course you did not apply for employment as a referee at the WWWF? Well did you? :-)

  • guest

    I rely on the kindness of tipping strangers.

  • The_Sharkey

    I don’t think it has to be State-wide, but it should be region-wide at least.
    If cities like Oakland, Albany, and El Cerrito don’t sign on to it we’d just be driving even more business straight out of town.

  • The_Sharkey
  • The_Sharkey

    Mosura vs. Gojira: Whoever Wins… We Lose

  • Truth Sayer

    Ok, our discussion was about tipping. And, fair wage.

  • Oki O’Conn

    My experience is that service in the UK is terrible and I’ve heard the same about Australia. I’m sure it’s not black and white and there are other factors involved (eg. cultural), but my guess is that quality of service would decrease here in many if not most cases if we did away with tips.

  • Sly21

    A tip credit is a subsidy to the employer provided by tips. It shifts part of the wage bill to customers…thus making tips not tips but part of the wage.