David Benowitz, CEO of Craft and Crew, a restaurant group that includes Stanley’s Northeast Bar Room (pictured), is among the dozens of bar and restaurant owners backing the Pathway to $15 campaign. File photo

Restaurant-backed campaign enters minimum wage debate

Updated: March 8, 2017 - 1:15 pm

Pathway to $15 advocates a $15 minimum wage with exceptions for tipped workers

Dozens of bar and restaurant owners are lining up behind a campaign to phase-in a citywide minimum wage of $15 an hour while making an exception for workers who earn tips.

Supporters of the Pathway to $15 campaign — who between them own more than 100 Minneapolis bars and restaurants — back a proposal that would treat most bartenders and servers who work in the front of the house differently than the cooks and dishwashers in the kitchen.

For back-of-the-house staff, the minimum wage would rise steadily to $15 an hour over a period of three to seven years. Meanwhile, their tipped co-workers would see gratuities factored into the wage calculation; bartenders and servers could be paid just $9.50 an hour, as long as their combined earnings from wages and tips totaled at least $15 an hour over the course of a shift. If not, their employers would have to make up the difference.

That’s what’s known alternately as a “tip credit” or “tip penalty.” Mayor Betsy Hodges chose the latter term recently when she described her reasons for opposing the two-tiered system, which she said would unfairly penalize women, who make up the majority of tipped workers.

Supporters of Pathway to $15 counter that the proposal simply recognizes the “total taxable income” of tipped workers. The alternative, they say, is layoffs, higher menu prices and the loss of Minneapolis businesses that close or move.

Under the Pathway to $15 proposal, the minimum wage increases to $15 by 2020 for large employers, those with more than 250 employees. Small employers have until 2024.

Locally owned franchises of larger national chains, like McDonald’s, or regional chains, like Davanni’s, could count as “small employers” if they have fewer than 250 employees based in Minneapolis.

The proposal also creates a separate wage tier for youth workers. Minimum wage would be $8.50 for those under 18.

It’s a plan they’re taking to the City Council, which is expected to vote on a municipal minimum wage in the late spring or early summer. The details of a proposed ordinance are expected to be made public in May.

Targeting tips

David Benowitz, chief operating officer of Craft and Crew, a restaurant group that includes Stanley’s Northeast Bar Room and The Howe, estimated that extending the $15 minimum wage to his tipped employees would increase expenses at the two Minneapolis restaurants “well over $200,000 per year, per store.”

“That’s a very scary number for us because we operate on very thin margins,” Benowitz said. “… That’s well over our profit for the year, so we would have no choice but to change the business model for how we do business.”

He said those changes would likely include raising menu prices by 15–20 percent. That’s significantly higher than the less than 5-percent increase predicted by the economists who simulated the effects of a minimum wage hike in a City Council-commissioned study.

Without a carve-out for tipped employees, Benowitz’s Minneapolis restaurants would likely adopt a no-tipping policy; he said it would be easier for customers to swallow the higher prices if they didn’t have to tip on top of the check. Benowitz said his servers currently average about $24 an hour after tips, and the prospect of maxing-out at $15 means many of them support Pathway to $15.

That’s why veteran server Sarah Norton supports Pathway to $15. Norton, a mother of three who lives in St. Paul, currently totals roughly 40 hours a week between shifts at Jefe in Northeast and Jun in the North Loop — and takes in additional income teaching voice lessons. Norton earns $9.50 an hour at her serving jobs, but she said her take home pay averages closer to $30 an hour with tips.

Norton, who runs the Facebook group Service Industry Staff for Change, said she was offended by Mayor Hodges’ comments on tipping. Echoing Saru Jayaraman of the Restaurant Opportunities Center, who in February spoke in Minneapolis, Hodges wrote in a blog post that “tipping as an institution is rooted in the history of slavery” and it originated as “a substitute for a decent, fair, and equitable wage.”

“She’s coming after the tips,” Norton said. “In my experience, somebody is always coming after our tips, somebody always wants our tips, somebody always thinks we’re making too much money.”

‘One fair wage’

Other servers see $15 an hour as a pathway to financial stability, including Destiny Davis, a 24-year-old with five years of restaurant experience. Davis was most recently employed 20–30 hours a week as a server and bartender at the Oak Grill inside the downtown Macy’s, where her take-home earnings varied significantly from one shift to another.

Davis earned $10 an hour behind the bar, but could take home $200 in tips on a good night. Another night, she might struggle to afford bus fare home after a slow shift waiting tables.

“There have been days when I’ve clocked in for four hours and I haven’t made a dime” in tips, she said. “… Then, two weeks later, my check is for $65.”

Davis, who is African-American, said she has experienced overt racism on the job, including customers who ask to be waited on by a white server. It’s not just the whims of her customers that create uncertainty in her earnings; a sunny day would draw customers away to restaurants with patios, and a holiday would clear workers out of downtown.

Davis, who lives in South Minneapolis with her partner, said she was living close to the edge financially. If she wasn’t in a relationship, she’d consider moving back in with her mom.

“If I’m making $15 an hour plus tips, I can take a little breather,” she said.

Advocates on both sides of the tipping debate agree that phasing-in higher wages would blunt the impact on business owners. A phase-in was included in the charter amendment 15 Now Minnesota attempted to put on the ballot last November.

15 Now Minnesota lost their fight in the courts, and afterwards advocates for what is often described as “one fair wage” shifted their focus to influencing the shape of the municipal wage ordinance now under development.

Ginger Jentzen, a longtime server who recently stepped down as executive director 15 Now Minnesota to run for City Council in Ward 3, said creating an exception for tipped workers would require restaurants to track the fluctuating pay of individual serving staff from shift-to shift.

“It puts it on the individual worker to negotiate with management constantly about what their wages were for the shift,” Jentzen said, adding the system “opens the door to intimidation and wage theft.”

She described the threat of a no-tipping policy as “a scaremongering tactic that comes from the National Restaurant Association,” an industry group that advocates for tip credit policies. Jentzen found the idea that restaurants might flee Minneapolis — and their customer base — similarly far-fetched.