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March 18, 2024 Opinion & Commentary

Bordonaro: A solution looking for a problem? Tipped wage debate raises restaurant industry concerns

YEHYUN KIM / CTMIRROR.ORG Connecticut State Capitol in Hartord.
By Greg Bordonaro

The March 5 issue of the Wall Street Journal had an eye-catching, front-page headline: “Costs Drive Menu Prices Up And Restaurants Owners Out.”

“Independent restaurants are on financial life support,” the story’s second paragraph read, “squeezed between escalating payroll costs and diners’ dwindling tolerance for ever-higher checks.”

The story went on to say that while larger fast-food restaurant chains have emerged from the pandemic in a relatively strong position, many sit-down eateries continue to struggle.

Greg Bordonaro

Higher food prices and prolonged workforce shortages are among numerous other issues impacting the industry.

The article ought to be a must-read for policymakers in the General Assembly, especially as they consider proposals that would increase costs for Connecticut restaurants and other small businesses.

The story is particularly relevant to the debate over eliminating the state’s tipped minimum wages for hourly restaurant employees, which has pro-labor advocates at odds with business owners.

Democrats on the Labor and Public Employees Committee in February introduced Senate Bill 221, which would gradually eliminate the lower minimum wage earned by hourly employees who receive tips. Instead, it establishes a single minimum wage that would apply to all workers by 2027.

Connecticut’s hourly minimum wages for waitstaff and bartenders are $6.38 and $8.23, respectively. The state’s regular minimum wage is $15.69 per hour. Waitstaff and bartenders are still required to earn at least $15.69, but tips count toward that total.

If tips don’t get workers to the $15.69 threshold, employers are required by law to make up the difference.

Several pro-labor organizations, including One Fair Wage and the Connecticut AFL-CIO, support the measure, arguing it ensures workers a predictable and stable paycheck.

They point to other states that have one minimum wage for all workers, including California, Washington, Minnesota, Alaska, Oregon, Nevada and Montana.

Few would argue with the fact that it would be difficult, if not impossible, to make ends meet in high-cost Connecticut earning $6.38 or $8.23 per hour. But the reality is, tipped workers make much more than that.

According to a survey conducted by the Connecticut Restaurant Association last year, which polled more than 200 eateries, the average server in Connecticut makes $33 per hour, while the average bartender earns $38 per hour.

To be fair, those numbers are likely on the high end, possibly inflated by restaurant workers at fine-dining establishments who earn larger tips.

But official government data also shows that waitstaff and bartenders in Connecticut earn well above the minimum wage.

The average hourly wage for Connecticut waiters and waitresses was $19.42 as of May 2022, well above the state’s $13 minimum wage at the time, according to the U.S. Bureau of Labor Statistics. Bartenders earned $19.39 in May 2022.

It’s in the best interests of restaurant owners to offer even higher wages today, given the labor shortages still plaguing the industry.

It should be supply and demand that dictates those decisions, not another government mandate.

Perhaps even more convincing is the case made by Keith Beaulieu, owner of The Main Pub restaurant in Manchester. He submitted testimony opposing Senate Bill 221.

Beaulieu’s restaurant has been in business for more than four decades and is the longest-running, family-owned eatery in Manchester, he said.

The Main Pub usually employs between 35 to 40 people. On average, its servers make approximately $29 per hour, and its bartender makes approximately $31 per hour, said Beaulieu, who is also chairman of the Connecticut Restaurant Association. Those hourly averages include the current tipped minimum wage, plus tips.

If the bill under consideration becomes law, Beaulieu said his average annual payroll would increase by more than $140,000.

“That is an unimaginable cost increase for a small business,” Beaulieu said. “In order to keep my business afloat, my only option would be to apply service charges to customers’ checks to cover the increase in payroll costs.”

He added that removal of the tip credit will make it harder for small, independent restaurants to compete with larger chains that can more easily absorb substantial payroll cost increases.

“Moreover, if a service charge is added to checks, customers may be less inclined to tip, further reducing my servers’ earnings,” Beaulieu said.

The restaurant business is difficult, and the industry’s profit margins — especially for smaller, independent restaurants — have been under pressure since the pandemic.

Doubling a restaurant’s payroll costs for waitstaff and bartenders, even gradually, seems too aggressive. A more reasonable debate should be centered around potentially increasing the tipped minimum wages, rather than eliminating them.

Let’s see if policymakers are truly serious about creating a pro-business environment in Connecticut.

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