Since the federal government implemented the separate wage for tipped workers in 1966, it has been the law of the land in Maine and for good reason.
The way it works is simple: If you go to a restaurant and receive good service, you provide a tip to your server in addition to the bill. Your server makes a subminimum wage — $3.75 per hour in 2016 — plus whatever you tip. If the server fails to make at least the minimum wage by the end of the shift, the employer makes up the difference. Under this system, many tipped employees have made a decent living, often with little experience, while attending school or raising families.
While encouraging top-notch service, this system helps keep overhead down for restaurant owners, which in turn keeps menu prices lower and allows business owners to pay higher wages to employees working behind the scenes.
So, you see, it’s a win for the customer, it’s a win for the employee and it’s a win for the business owner.
Unfortunately, all of that could change because of the passage of the minimum wage referendum last November. While supporters touted Question 4 as an anti-poverty measure to ensure that anyone working a 40-hour work week can support a family, eliminating the tip credit is the wrong way to go about this, as many tipped employees earn a decent living.
Last session, the Legislature considered eliminating the tipped credit, and the testimony overwhelmingly was opposed to the idea. In the end, after 26 restaurants testified in overwhelming opposition, the bill died in committee.
“A server or bartender working for me for five to six shifts per week (between 25 to 35 hours) makes between $34,000 to $55,000 annually. Changing their pay structure to minimum wage poses the real possibility of a server making $10,400 to $14,560 annually,” Wendyll Caisse, the owner of Buck’s Naked BBQ & Steakhouse in Freeport, said in her testimony.
Jonas Werner, owner of Azure Cafe in Freeport, testified that “The reality is that not one server at Azure makes minimum wage. Instead, every one of them, even the newest or least experienced among them, makes considerable more. … The average hourly wage for a server at Azure is an enviable $21.14 per hour.”
Ben Lord, co-owner of The Black Birch in Kittery, also testified that “As seasoned industry workers we were aware that a good server, even in a tight economy, earns well beyond the minimum wage. … I can attest that my servers earn an average of $25 per hour.”
Dan Beck, co-owner of Moody’s Dinner, testified that eliminating the tip credit “will only increase the hourly wage of the highest paid restaurant worker … the server.” He went on to testify that “The hourly rate with tips and wages averages $15.59 to $20.54 per hour.”
Thanks to the tipped credit, running tables has been an honorable way for hardworking Mainers to make a living. But with the passage of Question 4 last November, all that is about to change.
To deal with the 220 percent increase in payroll costs as the wage for tipped workers is raised from its 2016 rate of $3.75 to $12 per hour by 2024, at which point the tipped credit is eliminated, businesses will be forced to raise prices, reduce hours, eliminate positions, switch to automation when possible, pay the back of the house employees significantly less or do away with benefits, such as health insurance and retirement plans, to make up the difference.
The fact of the matter is that Mainers got a raw deal with Question 4 because the special interests who drafted the legislation put three different measures together — increasing the minimum wage, eliminating of the tip credit, and indexing the minimum wage to inflation — that should have been voted on separately.
It’s time for the Legislature to pick up the pieces and amend this law in a way that honors the will of the voters without harming Mainers who depend on tips to make a decent living, restaurant owners who already skate by on paper thin margins or you, the consumer, so your next ham Italian doesn’t cost you $10.
Garrett Mason is the Republican Senate Majority Leader, and he is currently serving his fourth term in the Maine Senate. He represents the people of District 22, which consists of Litchfield, Wayne, Durham, Greene, Leeds, Lisbon, Sabattus, Turner and Wales.