Minneapolis Restaurants Call For Higher Minimum Wage To Include Tip Credit

More than 100 restaurants in the city have joined the group to call for concessions in the ordinance that's expected to arrive this summer.

As Minneapolis moves toward raising its minimum wage to $15 per hour, a group led by the city’s restaurant industry announced today that they’re on board—with a few caveats.
The Pathway to $15 group, composed of more than 100 restaurants in the city, is launching a campaign to shape upcoming legislation. They’re calling for a phase-in for any new wage and the inclusion of tips in what constitute minimum wage—a policy in many states that is sometimes called a “tip credit.”
“We support moving Minneapolis to a $15 an hour minimum wage,” said Kathryn Hayes, co-owner of The Anchor Fish and Chips restaurant in Northeast Minneapolis. “We just want to be sure that the unique pay structure of restaurant employees is recognized.”
Restaurateurs have expressed concern that a higher minimum wage would force menu price increases—something that customers might not be willing to stomach if they also have to add a tip on top of that—or cut into already razor-thin margins.
Under Pathway’s proposal, tipped employees would earn a base pay of $9.50 per hour – the state minimum wage. Any tips they collect on top of that would apply toward the city minimum wage. During payroll, if the base pay and the tips didn’t average out to $15 per hour, the employer would be required to make up that gap. If it met or exceeded it, there would be no additional calculations necessary on the part of the employer. Tips are already included in an employee’s wages for tax and insurance purposes.
In an issue brief put out that opposed the state’s minimum wage inflation adjustment that kicks in come 2018, the Minnesota Restaurant Association said the average server already earns more than $18 per hour between wages and tips, with many exceeding $25 per hour.
The group can claim support from at least some of the affected employees. Sarah Norton is a server at Jefe and leads the Service Industry Staff for Change group, which opposes many of Minneapolis’ “Working Families Agenda” proposals and boasts more than 3,700 members on Facebook. She said that any wage ordinance that didn’t take tips into account could end up hurting workers and the restaurants that employ them.
“A non-tipping model would have devastating effects on our thriving community,” she said in a statement for Pathway to 15. “Small businesses in Minneapolis are struggling to operate on a very thin profit margin. A policy that account for tips means we can protect our jobs and our employers.”
But the push for a tip credit—or tip penalty, as opponents call it—isn’t getting traction everywhere, including in the mayor’s office. After previously opposing a city-only minimum wage, Mayor Betsy Hodges said in late December that she could support Minneapolis going it alone with a higher wage that “does not penalize tipped workers.”
She reiterated that stance last Tuesday after meeting with Saru Mayaraman, a food service industry advocate who argues that tip penalties disproportionately affect women and people on color. “It’s clear that Minneapolis needs a leader that understands that creating a tip penalty in our minimum wage will harm workers in our city and likely statewide,” Hodges said. “I will work with labor organizations, advocates, business owners and councilmembers to ensure that any Minneapolis ordinance works for our workers and businesses alike.”
Amongst Hodges’ opponents in the 2017 mayoral election there is broad agreement for raising the minimum wage. Raymond Dehn, a state House representative for the Northside, has called for a $15 minimum wage with no tip carve-out. Activist Nekima Levy-Pounds has also advocated for a $15 minimum wage, though no records could be found on her stances on tips. Third Ward councilmember Jacob Frey calls for a higher minimum wage, but he doesn’t specify the amount for which he is aiming on his website. Former head of the Hennepin Theatre Trust, Tom Hoch, doesn’t mention minimum wage amongst his broad campaign issues.
Given that an ordinance is expected by this summer, the issue is likely to be part of the mayoral campaign, but could be wrapped up before Election Day rolls around.
A higher minimum wage is one of the last-standing proposals put forth by Betsy Hodges as part of the “Working Families Agenda,” which also included paid sick leave for all employees and so-called “fair scheduling.” Restaurant owners largely scuttled the fair scheduling ordinance, calling it too burdensome. A paid sick leave ordinance passed last year and goes into effect this summer.