With tips down, some restaurants have raised wages for servers. Will it last?
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Before the pandemic, Colleen’s Kitchen operated the way most restaurants in Texas do — they paid their servers the tipped minimum wage, $2.13 an hour, plus tips.
But in this new world, where business is way down and so few people are dining in, owner Ashley Fric started to wonder if having staff rely on tips was still a viable model. “The answer in pandemic times is no, you cannot pay somebody $2.13 an hour and hope that guests come in the restaurant,” she said.
Tips are down between 75% and 90% nationwide, according to One Fair Wage, a nonprofit that advocates for higher wages for service workers. Because of that, a lot of restaurants are reevaluating how they pay their staff, and many are raising hourly wages to incentivize people to return to work. That is particularly true at small and medium-sized restaurants in bigger cities.
“We are seeing a tremendous change,” said Saru Jayaraman, the president of One Fair Wage. “Our organization has been approached by literally hundreds and hundreds of restaurant owners asking for our help to transition to a full minimum wage.”
At a time when a lot of restaurants themselves are struggling, it’s a challenge for many to figure out how to make that work, financially. For Colleen’s Kitchen, in Austin, getting a loan from the Paycheck Protection Program was a game changer — it allowed the restaurant to start bringing back staff at $22 an hour.
PPP funds have also kept Farmers Restaurant Group — which has seven restaurants and a distillery in the D.C. area — afloat, and made it possible for them to bring back staff at a higher hourly wage, even though their business initially dropped 95%.
When they first started bringing employees back, “instead of using the tipped minimum wage, we just paid everybody $15 an hour,” said co-owner Dan Simons. “Whether we brought someone back as a cook, or we brought someone back as a driver, or a curbside runner or a phone answerer, we used that same one wage, across the board.”
Trident Booksellers and Cafe in Boston also initially offered $15 an hour, instead of the state tipped minimum wage, when they started bringing some staff back in May, according to Louie Levinson, who’s worked there for three years. Trident also initially offered to pay everyone for a full 40 hours a week, he said, whether they worked that much or not.
“$15 for 40 was great,” said Levinson, who’s also a student at Northeastern University. “I was happy to make that money.”
It still wasn’t nearly what he had been making before with tips, but it made going back to work worthwhile. Now that restaurants in Massachusetts have been allowed to reopen to some indoor and outdoor dining, though, Levinson is making a little less — about $12 an hour, plus tips — and is no longer guaranteed 40 hours a week.
“When they bumped it down that was really rough, because I was getting weekly paychecks that were in the mid-$300s,” Levinson said. “Which, $300 a week for a month is nothing in Boston.”
He is starting to get tips again, but nowhere near what he once made. In part because the cafe is still only doing a fraction of its normal business, and in part because people now pay upfront, when they order, to minimize contact.
“When people get to that final menu and they see ‘tip,’ they might be like, ‘I haven’t received anything yet, I haven’t gotten any services yet, so I’m not going to tip on this,’” Levinson said. “And then they don’t, and then they just kind of carry on. So that’s why the hourly’s been really helpful too, because there’s enough people who aren’t tipping.”
Emmanuel Munoz is also finding that people aren’t tipping as much as they used to. He works at a restaurant in Williamsburg, Brooklyn, that’s doing a lot of curbside pickup and some outdoor dining.
“You have people that sometimes over tip, give you more than 20%,” he said, “And that’s awesome. But you have one of those, and then you have 10 customers that don’t tip you anything.”
The restaurant has raised wages for servers, from $10 to $15 an hour, which has been a big help, Munoz said, but even with that bump he’s making less than he used to. He made more before, working primarily as a manager — now, with business way down, the restaurant doesn’t need managers. And tips aren’t making up the difference.
“It’s very hard,” he said. He’s struggling, the restaurant is struggling. But he also didn’t have another option. Unlike a lot of his old coworkers, he’s not eligible for unemployment.
“We have this situation with these coworkers that are able to qualify for unemployment and they are not coming back,” Munoz said. “They don’t want to risk anything. They don’t want to lose the unemployment, they don’t want to be out and risk their lives, and that makes sense. But in my case, I don’t have unemployment and I need to go out and find an income.”
That’s true at a lot of restaurants around the country, particularly those that pay the tipped minimum wage, which is $5 or less in most states.
“A lot of workers are saying no, I refuse to go back and put my health at risk and my family’s health at risk for $2, $3 or $4 an hour,” Jayaraman said. “That is resulting in a lot of employers just saying OK, I think I just have to pay the full minimum wage because either I have a conscience and I can’t ask workers to come back for this when tips are too low, or I realized workers won’t come back to work for this when tips are so low.”
Whether restaurants that have started paying higher hourly wages will continue to after the pandemic is another question. Some, like Farmers Restaurant Group, have already reverted back to the tipped minimum wage model. Now that restaurants have been allowed to reopen for some indoor and outdoor dining in the D.C. area, Simons said, it made financial sense both for the company, which is still operating at a loss, and for servers, who generally make a lot in tips.
“Especially right now, when we can’t build sales, and when the customer is sensitive to price increases, the math just isn’t there,” to continue paying servers a higher hourly wage, Simons said. “That’s why the prior structure is actually more affordable for the business. And in the case of my servers, they end up with more money.”
Colleen’s Kitchen is planning to keep paying employees more going forward — between $15 and $22 an hour, depending on their job description. To make that sustainable, the restaurant has instituted a 20% dine-in service charge.
“We plan to continue to pay all staff members a liveable wage that they can rely on,” Fric said. “I think it’s so important for our employees to be able to know what they’re going to take home that week, or what their anticipated take home that week is.”
Munoz is hoping the restaurant industry as a whole will move toward paying servers and other staff higher, more liveable wages.
“Why am I not able to expect that my check at the end of the week covers all my necessities?” he said. “Why do I have to wait for Friday night with a full restaurant so I can see that I am going to be able to have enough money for savings or for rent?”
COVID-19 Economy FAQs
With a slow vaccine rollout so far, how has the government changed its approach?
On Tuesday, Jan. 12, Health and Human Services Secretary Alex Azar announced changes to how the federal government is distributing vaccine doses. The CDC has expanded coronavirus vaccine eligibility to everyone 65 and older, along with people with conditions that might raise their risks of complications from COVID-19. The new approach also looks to reward those states that are the most efficient by giving them more doses, but critics say that won’t address underlying problems some states are having with vaccine rollout.
What kind of help can small businesses get right now?
A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.
What does the hiring situation in the U.S. look like as we enter the new year?
New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.
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