Initiative 77 Eliminates Tipped Wage: What Now?

Tipping is a controversial topic, and with the price of living growing higher, new measures are being considered to ensure tipped wages are enough to live by.

Washington DC is seeking a way to bridge the gap between pay with Initiative 77, a ballot issue that has many experts worried.

What Is It?

Initiative 77 eliminates tipped wage in Washington D.C., instead requiring employers pay the state minimum wage to employees.

The previous two-tier system offered a minimum wage of $3.33 to tipped workers and $12.50 to non-tipped. The state wage is expected to rise to $15 by 2020. On June 19, the ballot passed by a 55% vote.

Proponents argue it will combat the wage gap and discourage sexual harassment. Further, they add, it will eliminate any confusion for companies and employees. “Tipped employment laws can be particularly confusing to businesses,” admits an employment lawyer in Charlotte, NC.

However, while the Initiative was created with equality in mind, many worry it may have more negative consequences than anticipated.

What Are the Repercussions?

Some voters are concern Initiative 77 may cause more harm than good.

Financial Burden on Restaurants

One Harvard study researching the Bay Area found that for every dollar increase in tipped minimum wage, a restaurant was 14% more likely to close.

In the traditional two-tier method, consumers make up a large portion of the finances given to employees. If tips and hourly pay do not meet the non-tipped minimum wage, employers are required to pay the remaining balance. For example, if a server’s total wages are $10 an hour, the business must pay the other $2.50.

Because businesses with tipped workers will pay the full $12.50 to each employee, many experts suspect companies will be forced to close or make cuts.

Staff Cuts

To compensate for paying each employee more, many speculate businesses will reduce the number of workers they pay. A similar initiative that may be implemented in Michigan is expected to eliminate 14,000 serving jobs.

Further, employees can expect fewer hours. A study by the Employee Policies Institute indicated for every 10% increase in the tipped minimum wage, employees experienced 5% fewer hours.

Higher Menu Prices

Customers should also expect higher menu prices to make up for the difference in pay at restaurants. Additionally, some believe service fees will become mandatory.

Less Money for Servers

Some findings indicate that the equal wage may actually lead to tipped employees (servers especially) earning less.

Wage theft makes it impossible to know for certain how much servers make and studies are controversial, but many seem to feel they will make more without the Initiative. The Save Our Tips campaign, which is comprised of tipped workers and employees from the restaurant industry, was adamantly against the measure.

What Happens Now?

Although Initiative 77 has passed, it can still be blocked by the D.C. Council. Many on the Council do not support the new law, and Mayor Muriel Bowser is also against it.