By Doug Kellogg
Posted with permission from Americans for Tax Reform
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Is there a more mindless far-left policy than ending the minimum wage tip credit? For people who are supposed to care about workers, Democrats that support this move aren’t showing it.
In New Jersey – now governed by sentient left-wing interest group Phil Murphy – legislation has been proposed to end the tipped wage credit.
Assemblywoman Shavonda Sumter is the main sponsor of Assembly Bill 1972, which increases the base wage for tipped workers and moves to eliminate the credit entirely. Lawmakers are negotiating an amendment that would affect the phase in timeline.
Governor Murphy was quick to laud the measure and wants action by the end of the year. Murphy is also spearheading efforts to increase the state minimum wage to $15-per-hour, even though New Jersey’s wage is already indexed to inflation.
The wildest thing about the push to eliminate the tipped wage is that it is entirely unnecessary. Servers who work under the tipped wage credit already must make minimum wage at the end of the day.
As Marilou Halvorsen, president of the New Jersey Restaurant & Hospitality Association, told NJBIZ: “Nobody is making $2.13, and if they are, that is a wage-theft problem that should be reported… Everybody has to make at least minimum wage.”
There is no possible positive outcome for this policy. There are plenty of negative outcomes though…
Ending the tip credit would destroy a system that has been working for decades, for both businesses and workers.
For each $1 increase in the base wage for tipped workers, a median-rated restaurant is at a 14 percent increased risk of closing, a Harvard Business School study found in studying San Francisco, as California does not have a wage tip credit.
You don’t have to look cross-country to see negative consequences. In New York, over 270 restaurants closed after the minimum wage for tipped workers was increased by 50 percent in 2015.
Maine, which recently made a similar change to the tip credit, saw their legislature restore it less than a year later because it was such an overwhelmingly unpopular move. The concerns servers voiced about their net pay decreasing without the tip credit proved to be very real in practice.
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