Working for Tips

by John Stossel: Union protestors and celebrity advocates have decided that waiters' tips aren't big enough.

They are upset that in 43 states, tipped workers can be paid a lower minimum wage, as low as $2.13 an hour.

Not fair! say celebrities like Jane Fonda, who recorded commercials saying, "That's barely enough to buy a large cup of coffee!"

As usual, those who want the government to decide that workers must be paid more insist that "women and minorities" are hurt by the market.

But waitress Alcieli Felipe is a minority and a woman. She says the celebrities and politicians should butt out.

Thanks to tips, Felipe says in my new internet video, she makes "$25 an hour. By the end of the year, $48,000 to $50,000."

She understands that if government raises the minimum, "It'll be harder for restaurants to keep the same amount of employees ... (T)he busboy will be cut."

She's right.

Minimum wage laws don't just raise salaries without cost. If they did, why not set the minimum at $100 an hour?

Every time a minimum is raised, somebody loses something. "In the (San Francisco) Bay Area, you've got a 14 percent increase in restaurant closures for each dollar increase in the minimum wage," says Michael Saltsman of the Employment Policy Institute.

Activists are unmoved. "The problem with tips is that they're very inconsistent," University of Buffalo law professor Nicole Hallett told me. Hallett is one of those activist professors who gets students to join her in "social justice" protests.

"I simply don't believe that increasing the minimum wage for tipped workers will lead to a reduction in the restaurant workforce," she said. "Studies have shown that restaurants have been able to bear those costs."

I pointed out that last time New York raised its minimum, the city lost 270 restaurants.

"Restaurants always close," she replied.

"Restaurants don't always close," responds Saltsman. "Yeah, there's turnover in the industry, but what we're doing now to an industry where there's low profit margins, jacking up restaurant closures ... Something's not right."

The media rarely focus on those closings. We can't interview people who are never hired; we don't know who they are. Instead, activists lead reporters to workers who talk about struggling to pay rent.

"Forty-six percent of tipped workers nationwide rely on public benefits" like food stamps, Hallett told me.

I pointed out that many tipped workers are eligible for benefits because they don't report tip income to the government.

She didn't dispute that. "Many restaurants and restaurant workers don't report 100 percent of their income," she acknowledged.

Hallett and other higher-minimum activists also claim that tipping should be discouraged because it causes sexual harassment. Sarah Jessica Parker, Reese Witherspoon, Natalie Portman, Jane Fonda and 12 other actresses wrote a letter urging New York's governor to increase the minimum wage, claiming that "relying on tips creates a more permissive work environment where customers feel entitled to abuse women in exchange for 'service.'"

Tipping causes customers to abuse women?

Saltsman says research using federal data doesn't support that. "Data shows some of the states that have gone down this path that the activists want, changing their tipping system, actually have a higher rate of sexual harassment."

When I pointed that out to Hallett, she replied, "Sexual harassment is complicated; no single policy is going to eliminate that problem."

So raising the minimum won't reduce sexual harassment but will raise prices, will force some restaurants to either fire workers or close and will reduce tip income.

This is supposed to help restaurant workers?

Many object to being "helped." When Maine voters increased the minimum, so many restaurant workers protested that the politicians reversed the decision.

Alcieli Felipe doesn't want the government "helping" her either: "We are fine. Who are those people? Have they worked in the restaurant industry?"

Most haven't.

I'm a free market guy. I wonder, "Why should there be any minimum? Why can't the employer and employee make whatever deal they want?"

"That policy has been rejected," Hallett told me, "rejected for the last hundred years. We're not in that world."

Unfortunately, we aren't. We live in a world where activists and government "protect" workers right out of their jobs.
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John Stossel is author of "No They Can't! Why Government Fails -- But Individuals Succeed." Article shared by Rassmussen Reports

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