The Los Angeles City Council probably thought it was doing a favor for workers a few months ago when that body decided tipped employees should get the new higher minimum wage, just like other employees.
But that decision appears set to hurt, not help, many tipped employees.
As the front-page article in last week’s Business Journal pointed out, a few local restaurants already are jacking up their prices and asking customers not to tip.
That means wait staff at better restaurants might see their wages go from, say, $30 or $40 an hour down to some set hourly wage that’s probably lower.
Theoretically and legally, restaurants could pay waiters and waitresses as little as the minimum-wage law allows. (The city’s new ordinance calls for the minimum wage to ratchet up to $15 an hour by 2020, up from the current $9.) Better eateries will likely pay servers more. One restaurateur quoted in the article said she’s paying $28 an hour; another said $18.
Regardless, the wait staff will likely bring home less of the proverbial bacon under this new arrangement. And, just being candid here, more of that take-home will be taxed, further cutting into it, instead of being pocketed out of sight of the tax collector.
No, waiters and waitresses may have gotten shorted in the minimum-wage deal. The City Council would have done them a real favor by exempting them from the higher minimum wage. That way, the servers could have kept their tips and probably fared much better financially than what they appear to be facing now.
What’s more, restaurateurs will have a perfect excuse to do what some are already starting to do: raise prices and ask patrons not to tip. As one restaurant owner said in the article last week: “People say, ‘Oh, my God. We just spent $75 for two people to eat tacos.’ They haven’t gotten used to the idea that the service charge is included in the bill.”
Interestingly, restaurant owners lobbied to exclude servers from the minimum wage. But had wait staffs been excluded, restaurateurs would have been in the uncomfortable position of having to raise prices (to pay higher wages to cooks, dishwashers, etc.) while still asking patrons to leave tips for their underpaid servers. But now, since they can go the no-tip route, restaurant owners are better off getting what they didn’t want.
The new law that calls for much higher minimum wages may have additional deleterious effects for tipped employees. The founder of Umami Restaurant Group, for example, said he was opening fast-casual versions of Umami Burger so he could keep prices down by employing fewer servers. This is one early tidbit of anecdotal evidence to support the widespread belief that a higher minimum wage likely will result in fewer jobs.
We’re already starting to see where this is leading: More waiterless fast-casual restaurants in the midprice range and more no-tip restaurants in the higher-price range. Both are bad news for servers.
And, finally, just speaking as a customer, I’m no fan of no-tip restaurants. It robs a server’s incentive to provide superior service with a smile. Some people say it’s nice to leave a small tip, perhaps 5 percent, at a restaurant in Europe because the service fee often is included. But if you’ve ever suffered through a dining session with an indifferent or downright insolent waiter in Paris, 5 percent seems unduly generous.
But alas, Los Angeles seems destined to get more no-tip restaurants and more indifferent service.
Hey, City Council: There’s still time to undo the damage. You can go back and exempt waiters and waitresses from the new minimum-wage law. Restaurant owners may not like it, but the servers – and the customers – would be grateful.
Charles Crumpley is editor of the Business Journal. He can be reached at email@example.com.
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