Jul 22, 2023 3 min read

Tipped Worker Wages Hit Inflection Point Across America

Throughout the US, hospitality workers are attempting to make historic changes on tipped wages. As the country continues to recover from the pandemic, is now finally the time?
Tipped Worker Wages Hit Inflection Point Across America

The global pandemic devastated the hospitality industry, with thousands of long-standing restaurants closing throughout the United States. Even as the nation creeps out the heights of the detrimental health effects that came with the pandemic, the economic implications have remained at the forefront of the conversation. Going from 0% interest rates to roughly 5% in the summer of 2023 has resulted in a sharp increase in commodity prices, and in the context of foodservice, more expensive menu prices. Labor shortages have been just as big of an issue. Many individuals realized that working long hours on their feet for far below minimum wage could be replaced with the increasingly common work from home structure.

And as of this week, those economic implications are starting to play out as it concerns tipped hospitality workers. The three most populus cities in the United States all had varying degrees of news, yet all pointing towards the larger trend of potentially significant changes in the hospitality industry.

First, while Los Angeles has had tremendous attention on the writers’ strike, there was another strike taking place. Throughout Hollywood and Pasadena, hundreds of hotel workers walked out at 5am on Thursday morning. According to the Los Angeles Times, “Workers are picketing for higher wages and better benefits and working conditions. Hotel employees are forced into long commutes because their pay hasn’t kept pace with soaring housing costs” and “unless the hotel industry shares its historic profits, we may soon have no option but to call a boycott of the City of Los Angeles.” (Los Angeles Times)

Moving to the Midwest, Chicago introduced a bill to city council through the labor advocacy group One Fair Wage. The proposed bill intends to increase minimum wage of $9.48 for tipped workers to the standard city minimum wage of $15.80. For those who are unclear on current hospitality labor laws, operators can pay tipped employees less through a concept called tip credits, tips employees receive that are intended to make up the gap between a tipped wage and a typical minimum wage. The proposed bill has the support of the new Chicago Mayor Brandon Johnson, as well as city lawmaker Carlos Ramirez-Rosa, who believes “it’s not a question of if but how we’re going to get one fair wage.” (The Guardian)

This news was juxtaposed by a report that came out from WNBF Radio, a small radio station in Binghamton, New York, claiming New York State hospitality workers earn a shocking 44% more than the national hospitality worker average. As most know, New York is one of the global hospitality leaders, recruiting and retaining some of the finest hospitality professionals while hosting some of the best restaurants and hotels in the world. (WNBF)

These news stories are not the first of its kind new but a continuation of a larger trend. With over a million employees leaving in the aftermath of the pandemic, lawmakers understand the increasingly timely need to stop workers leaving the industry. Just earlier this year, Washington D.C. enacted a law to have minimum wage be the same for tipped and non-tipped employees by July 2027, the ninth state and territory in the United States to do so. (Washington Post)

The actions taken in Los Angeles and Chicago are clearly an attempt to level the playing field with places like New York State. Increased interest rates lead to more expensive commodities such as housing and food, meaning individuals need more money to pay for things. Decreased supply of hospitality labor has led to desperate operators, hypothetically shifting the power to the tipped employees.

As Jimmy Frischling likes to write in the context of food delivery, you get what you pay for and if you deem it to be a necessary service, you should have no issue with the corresponding price tag. If I have to pay “x” dollars more for food and beverage, knowing it accurately reflects what I am receiving, I am more than happy to do so. While I have seen no discussion of these three events in conjunction, ones that could rightfully result in hospitality workers and their desired wages meeting equilibrium, seeing a continuation of these events would be monumental in validating a crucial industry to the American economy, hopefully before it’s too late.

Image: https://www.latimes.com/business/story/2023-05-31/southern-california-hotel-workers-head-for-a-strike-authorization-vote

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