Eliminating the tipped wage in D.C. has led to higher prices and fewer restaurant jobs.
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When labor activists came to Washington, D.C. demanding higher wages for restaurant workers, they clashed with an unexpected adversary: restaurant workers.
A few decades ago, waiting tables or bartending in the nation's capital could be quite lucrative. "The money was amazing. At the end of a good bar shift, what some people had to spend an entire week scraping in an office nine to five, I could make that in a night," says Damon Dixon, a restaurant worker of 30 years.
In 2016, a national movement started pushing to raise the minimum wage to $15 an hour. But D.C.'s tipped workers, weren't affected, thanks to a carve-out that let restaurants pay employees a fraction of the minimum wage as long as their tips covered the difference. Known as the "tip credit," this policy is common across the U.S.
Labor activists aimed to eliminate the tip credit, arguing that workers should receive the full minimum wage on top of any tips they earned. Saru Jayaraman, founder and president of One Fair Wage, has led the movement.
When D.C. voters passed a referendum to eliminate the tip credit in 2018, the city council overturned it at the urging of restaurant workers.
One Fair Wage got the measure back on D.C.'s ballot in 2022, and it passed by a wide margin. "Seventy-five percent of them voted for it because it was a free toaster," says Geoff Tracy, the owner of two D.C. restaurants.
The elimination is happening gradually, but restaurants are already feeling the pressure. Tony Tomelden—owner of The Pug, a beloved dive bar—says he's feeling the strain.
Meanwhile, Tracy estimates the wage hike will add $400,000 to his payroll per location each year. "That's like doubling my rent," he says, adding that these costs will inevitably get passed on to customers.
"We're watching a beloved bar back, a beloved busser, a dishwasher have their jobs taken away," says restaurant worker Valerie Graham.
Jayaraman claims that restaurant closures and job cuts in D.C. aren't caused by the elimination of the tip credit. "Since the initiative, more restaurants have opened, more workers hired," she explains.
While restaurant employment did initially rise after the measure passed, jobs have decreased by 4.3 percent since their December peak, according to Federal Reserve data.
Jayaraman challenged those numbers. "If you look at government data that the D.C. Attorney General has approved, we have 10 percent more restaurants in the District of Columbia, seven percent more restaurant jobs, and 6.8 percent higher wages. And that data was confirmed by The New York Times in April of this year," she told Reason.
The New York Times article that she cited (actually published in March) in fact contained inaccuracies about the number of restaurant employees in the District. When Reason asked the Times about the errors, the paper ran a correction.
Voters, Dixon argues, are "on a savior complex trying to save people that didn't need saving in the first place. The tips is the main reason why we got into this industry."
Formerly thriving businesses are now grappling with closures, vacant storefronts, staff shortages, and escalating prices.
"Put the pieces together in the puzzle," says Graham, "and we can see that this is not working."
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