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The Truth Behind How Much Restaurant Servers Make in Minneapolis
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The Truth Behind How Much Restaurant Servers Make in Minneapolis

At the heart of the fight in Minneapolis over the “tip credit” is the question of how much tipped servers actually earn. It’s a question without any good answers.

The next time someone tells you how much money the average restaurant server makes in Minneapolis, you should probably take it with a grain of salt.
 
The topic’s gotten a lot of attention as Minneapolis debates whether or not tips should count toward a $15-an-hour citywide minimum wage that looks likely to pass in one form or another (as long as it doesn’t get quashed in St. Paul). And lots of people have answers: some cite a Bureau of Labor Statistics survey at an average of about $10 an hour, and others a Minnesota Restaurant Association-affiliated survey that found tipped workers make an average $28.56 an hour.
 
The chasm between those numbers is bigger than the $15 value of the minimum wage up for discussion at City Hall, which is to say, not trivial. The fight over the tip credit — whether or not employers will be required to pay all employees, tipped or not, at least the minimum wage if it increases — largely hinges on this issue. The problem: it’s a question experts say is almost impossible to accurately answer.
 

What people say servers make

Currently, Minnesota is one of seven states whose minimum wage does not include a tip carve out. That means workers who are tipped and workers who aren’t collect the same wage at minimum, $9.50 an hour from large employers and $7.75 from small ones.
 
Pathway to $15, a campaign by the Minnesota Restaurant Association, advocates changing that in Minneapolis, if the city moves ahead with a $15 an hour minimum wage. The organization argues forcing restaurants to pay servers $15 an hour regardless of the tips they make could hurt restaurants’ bottom lines, and ultimately workers if businesses cut back their hours and raise prices.
 
In March, Pathway to $15 released the results of a survey of 72 Minneapolis restaurants during the month of October that found tipped workers made an average of $28.56 an hour, working an average 19.1 hours per week.
 
The survey was sent to more than 500 restaurants in the city — “everybody for whom we had email addresses,” both members and non-members of the Restaurant Association, said Dan McElroy, the executive vice president of the Minnesota Restaurant Association. Responses came in from the likes of Red Cow, Crave, Hola Arepa, Manny’s Steakhouse, Pizza Luce and D. Brian’s Kitchen and Catering.
 
“We chose October because it didn’t have any paid holidays (where people would be off work and dining in restaurants extra days),” McElroy said. “Patios were largely open, but it was away from the holidays.”
 
The Restaurant Association asked respondents to record wage and tip data based on what they would report for taxes on a spreadsheet and send it in. McElroy said the group had an actuary look over the methodology.
 
“I am as confident as I can be that these numbers we are reporting are correct,” he said.
 
But not everyone agrees.
 
After the report came out, the Restaurant Opportunities Centers United, a national group that advocates for a flat minimum wage, released a statement rebutting the claims the Restaurant Association made. Their complaints included that the lack of information on the survey’s methodology makes it unclear whether the sample accurately represents the cross-section of Minneapolis restaurants, high end to low end. They also argue that in October, a Minneapolis Restaurant Week causes servers to earn more money.
 
“It’s clear that servers who work in fine dining restaurants earn high wages, it’s true — the higher the bill, the higher the tips are going to be,” said Teófilo Reyes, the Restaurant Opportunities Centers United’s research director. But he and others doubt that number is representative of an average across the profession, pointing out that many restaurant servers live in poverty.
 
Reyes said he believes the Bureau of Labor Statistics' estimates (figures compiled by the National Employment Law Project are often cited), which put Twin Cities-area waiters and waitresses at an average $10.29 an hour, are the best available. In February, Minneapolis Mayor Betsy Hodges wrote a post opposing the tip penalty on the city’s website that also cited the BLS numbers.
 
But there are problems with the BLS estimate, too.
 
First, it comes from a survey of the whole wide Minneapolis-St. Paul-Bloomington metropolitan statistical area, which includes 14 Minnesota counties and two in western Wisconsin. The minimum wage debate is focused on a relatively small chunk of that area, Minneapolis, and where a concentration of higher-end restaurants likely makes workers a bit more money than in suburban and rural spots.
 
“To me (that) sounds low,” for Minneapolis, said Celeste Robinson, with $15 Now, a group that’s been advocating to raise the wage to $15 an hour without a tip carve out. “I’ve worked in the service industry and not in a high-end restaurant ... (but) you can make a lot of money some days, (and) might go home with very little in your pocket some days, which is why it's very important to have a baseline wage.” She also pointed out that some tipped workers aren’t restaurant servers, and could be making less.
 
Second, the BLS estimates are based on a survey of employers who might not have complete information about what their servers make.
 
Tips that are left on credit cards are automatically reported to employers, but it’s common for servers not to report all their cash tips. That’s becoming less of an issue as more customers are paying with plastic, but it still creates hurdles for people trying to compile accurate data.
 
“The reporting of wages and tips is dependent upon the employer both knowing the tips paid to the employee and including that in the questionnaire response,” wrote Cassandra Wirth, a BLS economist, in an email. If a profession is clearly tipped, and it’s obvious the employer didn’t include tips, the BLS might leave a survey response out — but that depends on the bureau’s ability to identify that.
 
The Census Bureau has data for Minneapolis alone, but it includes “food preparation and serving related occupations,” which would include jobs that aren’t tipped, doesn’t break the number down to an hourly wage, which requires making assumptions about how much time workers spend at their jobs, and relies on workers being able to accurately report how much money they make. Wages for tipped workers can vary from week to week, said Sylvia Allegretto, a labor economist and the co-chair of the Institute for Research on Labor and Employment at the University of California at Berkeley who studies restaurant economics (Allegretto is opposed to tip credits).


 
Allegretto argues that talk of averages is somewhat misleading in the first place: first, depending on the type of establishment, the amount tipped workers make can vary wildly.
 
And second, even for the same server, wages can be volatile from shift to shift — because of the weather, because of the time of day (is it Monday afternoon or Saturday night?) and other things out of a server’s control.
 
“Are there some workers in the industry who make lavish wages due to their tips? I’m sure there are, but you have to think of the worker working at an all-night truckstop or at a Denny’s or at all the lower-end establishments that exist and how are they making ends meet?” she said.
 

Data quality issues

All of these issues add up to a murky picture of server wages.
 
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“There are some serious data quality issues that make it hard to know the full story behind tipped workers,” wrote Jacob Vigdor, one of the professors at the University of Washington working on the Seattle Minimum Wage Study, in an email, referring specifically to unreported income.
 
Asked whether there was a way to get a good estimate of average server wages, Vigdor said he’s come to the conclusion it would a tricky undertaking.
 
It would either require restaurant owners to open their accounting books — showing any credit card tips that were “cashed out,” (credit card tips that are distributed to the server in cash at the end of the night, which don’t necessarily show up in wage records), or require a methodological survey of waiters and waitresses asking about income not reported on W-2s, which “might be unreliable for several reasons,” he wrote.