One of us is a restaurant worker advocate, and the other a restaurateur and employer. To say we were adversaries might be too extreme, but it’s true that we have not always been allies. As the decimated restaurant industry tries valiantly to reopen, we unexpectedly find ourselves on the same side of a crucial policy conversation whose outcome will determine if the industry can transcend an unjust status quo.
In 2015 a mutual friend encouraged the two of us to sit down at a table and talk. Instead of making uncharitable assumptions based on whatever we’d read about one another, we had to stop and really listen. We realized we had each been equally committed to a common mission of rectifying our industry’s increasing challenges to provide dependable wages for all hospitality industry professionals, regardless of whether they worked in the dining room or in the kitchen. Although we had each been using different tactics – some more successful than others – we found common ground on one important thing: the archaic system for how restaurants compensate their hourly employees was a major contributor, if not the root of the problem.
Saru was pushing for a policy solution that would eliminate the two-tiered wage system and replace it with “One Fair Wage” — a full, livable wage for all workers with the ability to tip on top — a law that has now been adopted in seven states. Despite evidence that each of those states subsequently saw their restaurant industries grow in terms of sales and hiring, 43 states have yet to make the change, presumably because too many of their constituent restaurateurs could not imagine how to make a profit while paying higher wages to their front-of-house workers.
Frustrated that tips could not legally be shared among all employees, and noting a continually growing wage disparity between the front and back of house, Danny created a unique model — “Hospitality Included” — in which tips were completely eliminated, and compensation for all employees was fully factored into menu prices. While “Hospitality Included” was able to make some strides in narrowing the wage gap, this new model was challenging to communicate to guests, and both costly and difficult to administer. Furthermore, the industry at large never showed broad interest in moving in the same direction.
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The seismic moment we are currently living in has shifted sentiments. Even restaurant owners who once defended the two-tiered minimum wage system are changing their perspective. With unfathomably high unemployment in the industry, many tipped restaurant workers have been disappointed to learn that their subminimum wage pay was too low to qualify for state unemployment benefits. And for those who have been able to keep their jobs, with sparsely populated dining rooms and the rise of delivery and takeout, the idea of relying on tips to feed your family has gone from preposterous to downright impossible.
At the same time as our industry and its employees are being ravaged by economic devastation, restaurateurs are coming to grips with a flawed business model that has perpetuated deep injustices. Indeed, the subminimum tipped wage is a legacy of slavery, when restaurant owners following emancipation didn’t want to pay newly freed Black workers and so, instead, enshrined a policy in which customers would instead pay employees. And today, in a system that relies on tipping, tips for white workers can be twice as high as for Black workers. The subminimum tipped wage turns customer prejudice into public policy. As we strive to fully reopen our restaurants, we have a once-in-a-lifetime chance to reimagine our foundational systems so that all stakeholders can thrive.
In order for restaurants to compensate employees in a more equitable way, we need public-policy initiatives that address underlying structural challenges, some of which are fiscal and others of which are regulatory. For example, New York remains the only state in the union that forbids tips to be shared with back-of-house (kitchen) staff — even when all workers are paid a full minimum wage. In most fine-dining restaurants, this income disparity often fuels racial inequity. In part because of the legacy of segregation and discrimination in our society, more than 70% of tip-ineligible cooks and dishwashers are people of color, while front-of-house workers are predominantly white. Each time menu prices increase due to food, rent and other rising costs, only the dining staff benefits from higher tips, while the kitchen staff is not able to participate in this revenue growth.
Of course we need to address systemic racism and sexism in hiring and promotions. But beyond that, is the problem non-shareable tipping or a dual minimum-wage system? The answer is both. We have each come to agree that paying all hourly workers One Fair Wage — a full, livable wage with shareable tips on top — is vital to the future of a healthy, vibrant restaurant industry. Many restaurateurs, even those that once thought One Fair Wage was antithetical to profitability, are now reaching out to find responsible ways to move their own restaurants to a more equitable compensation structure. This commitment was exemplified by the hundreds of independent restaurateurs who recently applied to a new program, High Road Kitchens, which provides an initial cash incentive to restaurants that transition to One Fair Wage.
But this model, ideal as it is, may not be financially feasible for the entire industry unless it is accompanied by real tax relief. To encourage and enable restaurants to rehire people and to pay fair wages, we need both the federal and state governments to cut payroll taxes, which for restaurant employers can currently top 10%, depending on the state. This tax relief is essential for restaurateurs to be able to fund the increase in base pay for all their employees, especially in this moment of crisis where many are struggling just to stay afloat. And crucially, state labor departments need to eliminate confusing and antiquated tip-sharing policies. If these rules are eliminated, both kitchen and dining-room teams can benefit from a guest’s gratitude for a great experience.
Now more than ever, the restaurant professionals who prepare and serve our food should be treated with the same respect and hospitality they provide us, and given a fair chance to advance their own livelihoods. Yes, we need to figure out how to safely reopen restaurants, but economic security for workers and for restaurant owners must be part of the equation for the industry to have a sustainable future. We can do this, but it will take immediate policy change to make it economically feasible for restaurants to do the right thing.
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