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Originally published April 20, 2014 at 8:01 PM | Page modified April 21, 2014 at 6:04 PM

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Tips are top concern for some in $15 minimum-wage debate

Employees and restaurants debate whether tips should be counted or excluded if Seattle sets a $15 minimum wage.


Seattle Times business reporter

The cost of labor at Seattle restaurants

Kelly Shea / The Seattle Times

Source: Washington Restaurant Association survey

Click the image to see the full graphic.
The typical full-service restaurant in Seattle spends more than a third of its money on labor costs and runs a 4 percent profit margin before taxes and debt service, according to an industry group.

What restaurant workers earn

Mark Nowlin / The Seattle Times

Source: Washington Restaurant Association survey

Click the image to see the full graphic.
In a recent survey, Seattle restaurants said they pay their waiters and bartenders a starting hourly wage of less than $10, but those same workers earn, on average, more than $28, with tips. Most other restaurant workers make well under $15 an hour.

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Local bartender Bridget Maloney would see her base hourly pay rise 61 percent under a push by labor activists to create a $15 minimum wage in Seattle.

But Maloney, a 28-year-old college graduate who works at Von Trapp’s on Capitol Hill, says she doesn’t need a pay raise.

“On weekends, I can make up to $45 an hour,” she said. “I work for my tips, not my minimum wage.”

Maloney is part of an increasingly vocal group of workers who live off tips and oppose the idea of a $15 minimum wage that makes no exception for the gratuities they receive. She says tipped workers should be paid a lower base hourly rate, as long as their tips make up the difference.

At the other end of the tip spectrum is Autumn Brown, a Starbucks barista in Seattle’s Georgetown area. She supports a $15 minimum for everyone and believes that a server’s pay should not depend on the generosity of customers.

“People don’t leave tips, or if they do, it’s usually what they get back for change,” Brown said.

The question of whether restaurants should be allowed to take a tip credit against their minimum-wage obligation has become perhaps the most divisive aspect of the $15 hourly rate debate. The city’s restaurant industry points to servers like Maloney as evidence that tipped workers are making good money, while labor activists counter that those like Brown are among the poorest workers in Seattle.

Brown, 19, shares her White Center apartment with a roommate, takes the bus to work, and is a student at South Seattle College.

Starbucks pays her a base hourly rate of $9.38, and tips add about $1.50 to $2 an hour, she said. Because she works only part time, Brown also relies on savings and financial aid to get by.

A $15 minimum wage “would take a lot of stress off being a student and working,” she said. “I want to work more hours so that I can afford everything. On the other hand, it’s exhausting.”

Local restaurants warn of the potential for business closures, layoffs and steep price hikes if they’re forced to pay all of their workers, including their wait staff, a $15 minimum wage.

They say their tipped employees already earn the highest-in-the-nation statewide minimum wage of $9.32 an hour. And in a recent industry survey, they say a $5.68 hourly increase would push their labor costs as a percentage of sales to an unsustainable 48 percent, up from 36 percent now.

Restaurants also have threatened to replace the tip line on their bills with a flat-rate service charge, which could then be divided among waiters, bartenders, busers and kitchen staff to help owners meet their minimum-wage obligations.

Maloney echoes those concerns. A year of tending bar at a popular restaurant in one of Seattle’s trendiest neighborhoods has afforded her a comfortable lifestyle: With after-tax earnings in the range of $700 to $900 a week, she has an apartment in Lower Queen Anne, drives a luxury sports sedan and is prepping for a two-week vacation in Spain.

“If people are paying a service charge, or if they’re paying more for their drinks and meals, there’s a chance they might tip less,” Maloney said. “And if they know we’re making $15 an hour, they might not to want to tip us at all. That’s a scary thing.”

Several plans in works

Mayor Ed Murray has said he’ll introduce a proposal of his own by Thursday if the Income Inequality Advisory Committee he appointed can’t reach a consensus before then.

Activists with the group 15 Now already have filed a ballot amendment that would establish a citywide $15 minimum wage next January, with a three-year phase-in for small businesses and no tip exemption.

Meanwhile, a business-backed group, OneSeattle, has suggested it will file a rival minimum-wage initiative if the mayor’s proposal does not take into account total compensation, such as tips and health-care benefits.

Maloney, who is involved in a new group called Tips are Wages, which is pushing to let employers take a tip credit against a $15 minimum wage, said most of her co-workers agree. She noted that the group’s Facebook page garnered more than 600 “likes” in its first week.

“We make a good living here. We just want the money to go to people who need it more than we do,” she said. “By no means are we pro-poverty.”

Washington is one of seven states that does not allow a lower minimum wage for tipped workers. Waiters, hairdressers, valets and other service workers must be paid a base hourly rate of at least $9.32, regardless of how much they make in tips. By comparison, the federal sub-minimum wage for tipped workers is $2.13 an hour, versus $7.25 for non-tipped employees.

David Rolf, a vice president of the Service Employees International Union and co-chair of the mayor’s task force, said labor activists worry that a carve-out for tipped workers in Seattle would set a dangerous precedent for the rest of the state.

“Organized labor is strongly concerned that if Seattle acts to redefine wages, it will open the door to lowering the state minimum wage,” Rolf said. “The experience in states that do have a tip credit is that it’s difficult to enforce. Workers don’t know their rights.”

He added that while employers elsewhere are supposed to make up the difference if a worker’s tips combined with wages fall short of the federal $7.25 minimum, “we’ve heard that often doesn’t happen.”

Puget Sound Sage, a progressive think tank that opposes counting tips toward the minimum wage, argues that most tipped workers in Seattle make less than $15 an hour, even with gratuities. They include not only waiters and bartenders, but also baristas, bellhops, hairstylists, manicurists and massage therapists.

Nicole Vallestero Keenan, research and policy analyst for Puget Sound Sage, analyzed U.S. Census data to estimate the total median hourly earnings for tipped workers in Seattle. Looking at the full tip spectrum, she said, the median is about $13.70 an hour.

“The high-end waiters and waitresses are not representative of the full breadth of tipped workers in Seattle. In fact, most tipped workers make below $15 an hour,” Keenan said.

But the Washington Restaurant Association, which opposes an immediate, across-the-board $15 minimum wage, recently surveyed its Seattle members and found that waiters and bartenders at establishments with table service make more than $28 an hour, on average, including tips.

About 210 full-service restaurants responded to the survey, according to the trade group’s president, Anthony Anton. He noted that because credit cards are used for some 90 percent of restaurant sales, tip data is more reliable now than when customers paid with cash.

“Let’s look at total compensation,” Anton said. “If someone’s making $60,000 a year, why are they part of the conversation?”

The typical sit-down restaurant in Seattle turns an annual profit of 4 percent, before taxes and debt-service payments, he said. A $15 minimum wage would make them unprofitable, he added, unless they cut costs or raise revenue.

More than two-thirds of the survey’s respondents cited price hikes and layoffs as among the five most likely business changes if a $15 wage goes through. About a quarter of respondents also mentioned a tweaking of tip policies, such as eliminating the tip line on credit-card receipts.

Then again, none of that takes into account the possibility that restaurants will benefit from workers with more money to spend after a citywide pay raise. Also, researchers at the University of California, Berkeley, found that municipal minimum-wage increases elsewhere led to better morale and reduced staff turnover, saving employers money.

“Data shows that hiring actually picks up after minimum-wage increases, particularly at restaurants and bars,” Rolf said. “People like to eat and drink. If you give people a wage increase, a significant percentage of that gets recirculated in the local economy.”

Owners’ perspective

At Terra Plata, an upscale restaurant on Capitol Hill, owners Tamara Murphy and Linda Di Lello Morton say a minimum-wage hike would hit them a couple of different ways: Not only would their own labor costs rise, they say, but so would the labor costs of their local suppliers.

Terra Plata (which, loosely translated, means “Earth to Plate”) specializes in locally sourced ingredients, such as fish from Ballard and bread from Columbia City. Its staples, including potatoes and onions, come from Charlie’s Produce in Seattle.

To the extent that a $15 minimum wage drives up labor costs at local suppliers, restaurants like Terra Plata face the prospect of paying more for products, said Murphy, a James Beard Award-winning chef.

“The first thing we’d have to do is reduce our labor hours. We’d look at having one less buser or one less server per shift,” Morton said.

They also would consider closing down for lunch, which is less profitable than dinner. And they probably would have to raise prices, Murphy said, even though the restaurant already is pretty expensive for dinner.

“We try very hard to keep our check average at $40 to $45 per person. We want people to come in and feel like this is their neighborhood restaurant,” she said. “It’s part of our brand.”

Morton added that price-sensitive customers might stop eating out altogether, at least at restaurants like Terra Plata.

“We get a lot of middle-class customers in here, and their income isn’t going up,” she said. “Raising our prices by 20 percent would not increase revenue by 20 percent. In fact, the chance that it would decrease revenue is just as good.”

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com. On Twitter: @amyemartinez



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