August 20, 2024 • 52 mins
The battle over raising the minimum wage for tipped workers and permitting tip pooling bounces to the Massachusetts ballot this November. Saru Jayaraman, President of One Fair Wage and Director of the Food Labor Research Center at UC Berkeley, argues that the current tipped wage structure perpetuates low pay and high turnover. Although the wage increase would occur over five years, opponents assert the mandate would be detrimental to some small and independent restaurants and could fail to increase employee job satisfaction and retention.
This episode is part of the Tipping and Wage Series where we explore the various angles of this debate with restaurant owners, advocates, academics, and consumers to gain a deeper understanding of the bottom line.
Boston University School of Hospitality Administration is committed to presenting topics shaping the hospitality industry's future with thoughtful and constructive discussion that respects different perspectives. We welcome your input and feedback. Email us at shadean@bu.edu
Tipping and Wages Series podcasts:
California Raises Minimum Wage for Fast-Food Workers with Chris Simms, CEO and Founder of Lazy Dog
Referenced in this podcast:
Always Essential, Still Waiting for Change: Service Worker Fatalities and Inequities During COVID and Post-Pandemic, March 2024
Dean’s Distinguished Speakers Series with Saru Jayaraman, presented by BU School of Hospitality, February 7, 2024
Press Release: Department of Labor Renews Multi-Year Initiative to Provide Enforcement, Outreach, Education for Restaurant Workers: 85% of investigations find violations in fiscal year 2021
The “Distinguished” podcast is produced by Boston University School of Hospitality Administration.
Host: Arun Upneja, Dean
Producer: Mara Littman, Executive Director of Strategic Operations and Corporate Relations
Research and Content Creation: Lan Lu
Marketing: Anne Dawson
Editing: Isabella Laikin and James Leon
Music: “Airport Lounge" Kevin MacLeod (incompetech.com)
Licensed under Creative Commons: By Attribution 4.0 License
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SPEAKER_01 (00:05):
Welcome to the Distinguished Podcast.
I'm your host, Arunukneja, Deanof the Boston University School
of Hospitality Administration.
Today we are poised for athought-provoking conversation
with Saru Jayrahman, thepresident of One Fair Wage, on
the transformative potential andthe contentious debates
surrounding dipping and fairwages in hospitality.
(00:26):
Our commitment at BU is toprepare future leaders who are
equipped to navigate and shapethe industry landscape,
embracing innovation whilescrutinizing proposed changes to
ensure they serve the greatergood.
Saru, welcome back to BiusSchool of Hospitality and thank
you for joining us to explorethese pivotal issues from
(00:46):
multiple perspectives.
SPEAKER_00 (00:48):
Thank you for having me.
SPEAKER_01 (00:50):
Please note that the one fair wage position from our
teen's distinguished talk inFebruary this year is available
on the Biou School ofHospitality YouTube channel.
So let's start Saru with thebasic question.
When we talk about the ballotinitiative to eliminate the
subminimum wage, theMassachusetts Restaurant
Association argues that thesubminimum wage, the term
(01:14):
subminimum wage is inaccuratebecause the tipped wage laws,
every tipped employee isguaranteed minimum wage, which
could be a combination of tippedwage and tips.
So if tipped employees areearning the minimum wage, and in
many cases well above theminimum wage, what's the
justification for framing thetipped wage as a subminimum
(01:34):
wage?
I know it's just semantics, butthat framing conveys information
to the readers, listeners, whichmay not be accurate.
SPEAKER_00 (01:42):
So uh the sub minimum wage is important to
understand in a both historicand current context.
Um, historically, the subminimumwage for tipped workers was
created to allow restaurants tohire newly freed black women
after emancipation to for freeand tell them they were going to
live on tips.
It's important to note thatprior to emancipation, waiters
(02:05):
in the United States, in Boston,were white men who got full
wages, no tips.
And the wage, the value placedon these workers went down from
a full minimum wage to no wage,just as the population of these
workers changed from white mento black women.
And so I don't know how youunderstand that.
Sub means less than.
(02:27):
I don't know how you understandgoing from a full wage to no
wage based on the identity ofthe population, other than
calling it less than a minimum,less than what it was.
And that idea that thispopulation of mostly black women
could get no wage, only tips,became law in 1938 as part of
(02:48):
the New Deal when all otherworkers received a federal
minimum wage for the first time.
But again, these workers weregiven zero dollars.
They're told you can be paid aslittle as nothing because you're
getting tips.
And we went from$0 in 1938 to$2.13 an hour.
Now we continue to call that asub-minimum wage because it is
(03:09):
far less, sub, far less than theactual minimum wage paid by
employers, not by customers, notby anybody else.
But what is the employer payingthe worker?
Actually, the social contractthat comes from the idea of a
minimum wage, it's a contractbetween the employer and the
worker, not anybody else, notthe customers, not the
(03:30):
government.
The minimum wage is the ideathat an employer pays something,
the least of something minimum,to workers.
And if we're allowing employersto pay less than that, then that
is a sub minimum.
But more importantly, in thiscurrent day and age, you said
that the Restaurant Associationclaims that, you know, federal
law says tips have to bringworkers to the full minimum wage
(03:52):
or the employer makes up thedifference.
So let's examine whether that'sactually happening.
So in from 2009 to 2011, theU.S.
Department of Labor under theObama administration actually
conducted a very thoroughinvestigation with thousands of
restaurants to see whether therules and laws surrounding this
two-tiered wage system werebeing compliant with.
(04:13):
They found an 84% violation ratewith regard to employers
actually ensuring that tipsbrought you to the full minimum
wage or they would pay thedifference.
At that point, the SolicitorGeneral of the U.S.
Department of Labor, PatriciaSmith, declared the issue
unenforceable.
She said, it is so complicated,it is so much for small
(04:34):
businesses and large businessesto have to go back hour by hour
and figure out whether workersgot the tips they need to bring
them to the minimum wage or paythe difference.
It's so complicated for them,it's impossible for us as a
federal agency, which franklyhas a lot more uh power and
resources than a statedepartment of labor like
Massachusetts.
So she said this isunenforceable.
(04:55):
That is the point at which theObama administration actually
changed their stance from beingfor a subminim wage for tipped
workers to saying, no, we need afull minimum wage with tips on
top.
But more recently, that wasabout a decade ago, more
recently, we have surveyed herein Massachusetts and around the
country thousands of workers.
Our most recent survey of over2,000 restaurant workers, over
(05:18):
50%, actually closer to 57% ofworkers say, I regularly do not
receive a full minimum wage withtips.
It happens when days are slow.
And so as long as workers saythey're consistently not
receiving the full minimum wagewith tips and employers are not
making up the difference, itcontinues to be a subminimum
(05:40):
wage.
SPEAKER_01 (05:40):
So there are two big issues here.
One is the historical context,and I'm going to return to that
in a in a minute.
But let's talk about thisenforcement.
And you and you said you cited astatistic that 57% of staff have
said that they consistently donot receive this.
Where are you getting this 57%number from?
SPEAKER_00 (06:01):
So we, as one fair wage, have been conducting
surveys of restaurant workers.
I mean, I'm also an academic, sowe conduct surveys across the
country.
We have been for 20 years.
Our most recent survey wasfunded by the Robert
Wood-Johnson Foundation.
They funded us to do a big studyof restaurant workers.
We actually, you know, set up apretty rigorous meth meth method
(06:23):
of, you know, with a surveyinstrument and had paid
surveyors out conducting surveyswith restaurant workers.
57% of the over 2,000 workers wesurveyed said they are regularly
not receiving the full minimumwage with tips.
They didn't say it was all thetime, every shift, but they said
it happens pretty consistentlythat there's a slow shift or uh,
(06:46):
you know, a slow day.
The tips don't bring them to theminimum wage, and the employer
does not make up the difference.
SPEAKER_01 (06:51):
Aaron Powell I'm sure that um restaurant owners
would differ.
And I wonder if there is, youknow, there to some extent,
since this is what you'readvocating for.
SPEAKER_00 (07:03):
I think even if restaurant workers want to
differ over our data, I wouldencourage you to look at two
sources of data.
The U.S.
Department of Labor analysis ofthis issue from 2011-2012, and
again, uh more recently, U.S.
Department of Labor Bureau ofLabor Statistics data, which
shows the median wage for tippedworkers in the United States.
(07:25):
Right now, the median wage fortipped workers in Massachusetts
hovers just around the minimumwage, which tells you that more
than half I mean, about half ofworkers, because median means
it's the middle, means that halfof tipped workers earn less than
the minimum wage consistently.
That's employer-reported payrolldata, Arun.
So that's not me, that's noteven workers.
(07:48):
That's what employers arereporting to the U.S.
Department of Labor as theirpayroll data.
If half, about half of workersare saying they earn less than
15, that means that TIPS areregularly not bringing workers
to the full minimum wage andemployers are not paying the
difference.
SPEAKER_01 (08:05):
The the the restaurant operators I speak to
and I've spoken to, and thosewho have yelled at me as well,
many of them have told me, andthey are from upscale
fine-dining establishments, andand they say that their staff,
their bartenders, their servers,their are routinely earning in
excess of$80,000 a year.
(08:25):
So that is clearly nowhere closeto the median or the or even the
minimum wage is way beyond.
SPEAKER_00 (08:31):
Right.
But that that is purelyanecdotal.
I think as academics, we have tolook at the most reliable source
of data.
It's not anecdotal.
Uh it is either survey data oreven more even better,
government data.
And again, this is what I'mreferring to as
employer-reported payroll data.
(08:52):
So either employers are notgiving the correct information
to the U.S.
Department of Labor, or they'renot telling you the right
information now.
It has to be one or the other.
But the but the Again, youcannot make policy in
Massachusetts or in the UnitedStates based on anecdotes or
what individuals say.
You have to make policy based onwhat is the median, what is the
(09:15):
average experience, what is theoverall experience.
I am sure there are servers inBoston that who sometimes make a
lot of money in tips.
I'm sure those workers even makeless when there are blizzards or
there are bad days or very hotdays.
Climate change is impactingworkers' tips.
I'm sure there are times wheneven the highest tip earners
(09:37):
experience economic instabilitybecause that is the nature of
tips.
But you cannot look at thehighest tip earners.
You cannot look at therestaurants where tips are
highest.
You have to look in creatingpolicy at what is the overall
experience of tipped workers inMassachusetts.
And looking at the overallexperience of tipped workers in
Massachusetts, they have atleast double the poverty rate of
(10:01):
workers in other industries.
They are using food stamps at atleast double the rate of other
workers in other industries.
And food stamps is a really goodmeasure, Arun, because people do
not apply for food stamps to goto the prom or to, you know, get
some extra income to like, Idon't know, do something fun.
Food stamps are very hard andstigmatized to apply for.
(10:24):
And so if you're going afterfood stamps and actually
obtaining them, you've gonethrough a rigorous, stigmatized
process because you cannot feedyourself and your children.
So the fact that tipped workersin Massachusetts use food stamps
at double the rate of otherworkers, to me, is that's all
you need in terms of data toknow that there's a problem
(10:44):
here.
SPEAKER_01 (10:45):
So let's go back to this historical um actually
before we go back to thehistory, um, I had um Dr.
Mike Lynn from Cornell um uhhere as a guest on the podcast,
and I was asking him, okay, sowhat are the factors that
determine tipping?
And pretty much he said mostpeople on average are tipping at
(11:08):
about 20%.
So the the other statistics thatyou are sh that you are citing,
which I need to obviously goback and look at them, um, are
at odds with the generalpractice where this extensive
research is found that mostpeople are going to tip at at
that high level.
SPEAKER_00 (11:27):
How how are they at odds?
Well, because if you work atIHOP and Denny's and your
pancake is less than five, eightdollars an hour, twenty percent
of five is one dollar.
So most people do not work atrestaurants where the bill is
(11:48):
$100 and you get a$20 tip.
Most people work at very casualrestaurants where prices are far
less and tipping is as a result,as a percentage, far less and
not enough to live on for aworker who earns$6.75.
So the worker at the IHOP isearning$6.75 with 20% of a$10
(12:11):
meal, and the worker at a fancyfine dining restaurant is
earning$675 with 20% of a$100meal.
So the worker at the IHOP isgetting at most$2 for one
person's meal.
The worker at a very fancy finedining restaurant is getting$20
for one person's meal.
So it's not at all at odds withwhat I'm saying.
Aaron Ross Powell Right.
SPEAKER_01 (12:31):
But the thing, the the the server at the IHOP or
Denny's is not just serving onecustomer who is ordering$10
worth of stuff.
In one hour, you know, if theyif they serve ten customers, and
let's assume the average bill isten dollars per person, that's a
hundred dollars, and then youare you're getting fifteen or
(12:52):
twenty dollars in tips inaddition to your six
seventy-five.
SPEAKER_00 (12:55):
So you're still way beyond the assuming you get ten
people in an hour at Diney's inan overnight shift, number one.
But you're also forgetting arune that waitresses servers do
not keep their tips all tothemselves.
They share it with busers andrunners and bartenders and other
people in the restaurant.
(13:16):
So they're not keeping, youknow,$15 or$20 in an hour.
At most, maybe they keep$10.
Maybe that's lucky, you get$10in tip in an hour.
Add that to$6.37.
That's$16.
So you are getting about sixthat you're getting about the
minimum wage, which is exactlywhat I said at the beginning.
(13:37):
The median in Massachusettshovers around the minimum wage,
including tips, which means youhave to understand that there's
a significant portion of peoplewho earn less than that, because
that's the median.
SPEAKER_01 (13:50):
Yeah, I think we need to also get a small
restaurant or maybe a Denny's oran IHOP owner to get some more.
SPEAKER_00 (13:56):
I don't know that owners are ever going to tell
you, you know, I think you needto have a worker.
If you I mean, have you ever hada worker on your podcast?
I I would bring- I would love tobring a worker who can share
what it's like, exactly whatthey earn in tips, ex exactly
the many instances where youhaven't had tips and you end up
not getting the full minimumwage, what that feels like, and
(14:20):
the precarity of sometimesgetting it, sometimes not, the
vulnerability that comes withthat as well.
So you've spoken to a lot ofowners on this podcast.
I would encourage you to speakto I we're happy to bring you
workers who can share theirexperience.
SPEAKER_01 (14:34):
Right.
I think in addition to workers,but like you said a few minutes
ago in the podcast, those areall anecdotal evidences.
I think we also need to go tothe companies that are providing
the payroll services to see howtheir systems are set up if they
are doing this on an hourlybasis and doing the
calculations.
Because most restaurantcompanies would probably hire
(14:58):
some payroll companies thatprovide the payroll services.
Yeah.
SPEAKER_00 (15:01):
But that that so I will give you an example.
I spoke to a an IHOP worker whosaid TIPS consistently did not
bring her to the full minimumwage, but the employer told her,
you better report that you areactually earning the minimum
wage in TIPS because I don'twant to have to deal with the
difference.
I don't want to deal withcorporate telling me you're not
earning enough.
I don't want to deal withcorporate getting upset with me
(15:23):
for having the company having topay the difference.
That happens all the time.
And so uh workers are then askedto report on income they're not
actually earning.
Uh they get retaliated.
Their boss is telling them to dothis, so they get retaliated.
So I would encourage you, if youdon't want to speak to workers,
speak to the MassachusettsDepartment of Labor or the U.S.
Department of Labor.
(15:44):
Those are sources of aggregatedata, again, employer-reported
payroll data that are much morereliable than anecdotal evidence
from employers.
But as long as you are talkingto employers, I encourage you to
also talk to workers.
But if you want the mostreliable aggregate data, I would
say the U.S.
Department of Labor is the placeto go or the Massachusetts
Department of Labor.
SPEAKER_01 (16:05):
Aaron Powell I think you have already identified a
few more guests that we need toinvite to report the workers.
But to be fair, um a lot of whenyou say that the employees are
are sort of forcing the workersto report tips, but those are
cash tips.
And most people now are payingwith credit cards.
(16:26):
Those trips are automatically.
SPEAKER_00 (16:36):
IHOPS and Denny's, Apple's, these are places where
you still see elderly people ona fixed income eating and often
paying in cash because that'swhat they feel most comfortable
doing.
SPEAKER_01 (16:48):
Aaron Ross Powell So number one, it's an enforcement
issue that the government is notenforcing its own laws.
And to counter that, we are nowtrying to change the system for
everyone, including the staffthat are making way above the
minimum.
SPEAKER_00 (17:03):
I would argue it's more much more than an
enforcement issue.
As I mentioned from thebeginning, this was a system
created to basically allowrestaurants to access free black
female labor.
And even if in this moment youhad 100% compliance with the
law, even if every employerensured that TIPS brought
(17:24):
workers to the full minimum wageor paid the difference, you'd
still to this day, from 1865,have a population overwhelmingly
women, disproportionate women ofcolor, highest rates of single
moms of any occupation, andhighest rates of sexual
harassment of any occupation.
You'd still have a populationthat's getting the majority of
their income from the whims andbiases of customer tips.
(17:47):
The professor Michael Lynn haspublished data in the past that
shows that tipping isoverwhelmingly biased.
It's actually very correlatedwith the race and gender of the
server.
And so black women consistentlyget tipped less than white men.
And we have the highest rates ofsexual harassment of any
industry because when a woman isforced to get a majority of her
(18:11):
income from customers whosebiases and behavior are going to
impact whether or not she getstipped at all or tipped well,
that means she has to put upwith whatever the customer does
to you, however, they treat heror talk to her or touch her
because she's reliant on theirincome, not the$6 to pay her
bills.
(18:31):
The$6 is so low, it goes totaxes.
And so she truly is completelydependent on her customers to
feed her family.
And again, that makes her veryvulnerable to all kinds of abuse
and harassment.
SPEAKER_01 (18:45):
Right.
And I think when I had aconversation with Mike Lynn, he
did say that that the 20% ispretty much standard regardless
of the level of service,regardless of who's serving you,
it's only beyond that thatpeople get more tips.
Okay, so um then I w I do wantto sort of return back to this
historical context where umwhere you talked about how uh
(19:09):
black women were being hired atat this subminimum wage.
But since then, what hashappened?
Has there been a change in thesociety?
And well, at that time tippingwas not expected, but now
tipping has pretty much becomestandard in restaurants.
And this 20% number, which hashas increased from 15% and 15
(19:30):
years ago.
Now that has become ingrained inour society.
And people who have done theseexperiments find that that um
and I had T.
J.
Callahan from Chicago, he alsodid this experiment.
Customers want to tip.
So when you increase the wages,you increase the menu prices, or
you add a service charge, andyou say you don't have to tip
(19:54):
anymore because you've alreadyincreased the prices to account
for fair wages, then customersare unhappy with that whole
because it is ingrained in thesociety.
SPEAKER_00 (20:04):
So that is not what we are advocating for.
What we are advocating for iswhat the seven states already
require (20:11):
California, Oregon, Washington, Nevada, Minnesota,
Montana, and Alaska alreadyrequire a full minimum wage with
tips on top.
99% of restaurants in thosestates have a traditional model
of tips, not service charges.
And tipping is the same orhigher, as Michael Lynn has
said, in those states as theyare here in Massachusetts.
(20:33):
In fact, quarter four, 2023,which is the last set of data we
have, California had the highesttipping average of any state in
the United States, higher thanMassachusetts.
And so we're nobody's advocatingfor tipping to go away.
In fact, tipping is that same orhigher in the states that are
doing the policy that we'realready advocating for.
(20:55):
In addition, I would really haveto push back.
I don't know when you talked toMichael Lynn, but there have
been so there's been so muchresearch on press now that in
the last several years,particularly post-pandemic,
tipping has declined prettysignificantly.
As sales declined, tippingdeclined, people are
experiencing tip fatigue as moreand more establishments outside
(21:17):
of the restaurant industry tryto introduce tipping in even
retail environments becausethey're trying to access the
same exemption that therestaurant industry has.
And so as customers are beingasked to tip in many, many, many
environments, they are tippingless in general.
Just yesterday, the WashingtonPost reached out to me.
Um, there is a new survey outthat showed that 51% of
(21:41):
Americans feel it's perfectlyokay not to leave any tip at all
if they feel they they weren'tpleased with the service.
And so we regularly see thishappening.
Maybe on the whole, people tip.
On the whole, people want tokeep tipping, but we are seeing
a general tip fatigue.
Across many sectors.
(22:02):
And we are seeing definitelyinstances frequently where some
people feel it's okay not totip.
And all of these instances pointto the instability and
unreliability of tipping.
Tipping is not something you canever be guaranteed or count on.
You cannot, you say, MichaelLynn says it's 20% across the
(22:23):
board.
But that doesn't mean a workerconsistently receives 20% all
the time, every day, everymonth, every but you know what
is consistent for that worker?
They have to pay rent everymonth.
You know what is consistent?
They have to purchase groceries,and they're facing the exact
same inflationary prices in thegrocery store that you and I and
restaurant owners are facing.
(22:43):
You know what is consistent hasbeen the increase in gas prices
over the last several yearssince the pandemic.
All of those things have beenconsistent.
The wage has remained stagnant.
The one thing that is notconsistent and actually has been
declining is tipping.
SPEAKER_01 (22:58):
So the so there is a tipping fatigue, and I feel it,
and I think everyone feels it.
We go every single place we go,there is a there So there is a
tipping fatigue, but I amcurious to know if the tipping
fatigue is with all the otherplaces that have jumped into the
fray and asking for tipping, oris it even in restaurants where
(23:18):
uh with the increase in prices,with the increase in inflation,
increase in uh the the logisticsand and so the price rise that
we see and then the percentageof tips, obviously if the if the
tipping percentage is fairlysteady at 20%, with the rise in
prices, your tips would go upautomatically.
(23:38):
But I want to go back to um theexample of Washington, D.C.,
where recently there has beenthis huge and so many people
who've eaten at restaurants sendme their bills and say, look,
the price of eating out in DChas just skyrocketed.
Unfortunately, DC is not a verygood test market because there's
a lot of lobbyists, a lot ofpeople who are coming to
(23:59):
convince the government to sortof, you know.
So it's and then obviouslygovernment has deep pockets.
So it's a very uh it's not avery good test market for normal
consumers for a city like Bostonor New York and any other
places.
But their cost of dining out hasincreased and a lot of
restaurants are going under.
Of course, new restaurants keepcoming.
(24:22):
There is always optimism.
Entrepreneurs always believethey can make the difference,
but a lot of restaurants seem tobe closing shop there.
SPEAKER_00 (24:30):
So again, I encourage you to look at
government data before makingclaims.
And if you look at governmentdata, one year after the passage
of November 22's I-82, November23, the only source of
government data that the DCAttorney General relies on is
licenses to restaurants.
If you look at licenses torestaurants, they went up by 10%
(24:54):
from November 22 to November 23.
So that is the only source ofdata the government finds
reliable in terms of the numberof restaurants in D.C.
increased by 10%.
Then we looked at the number ofrestaurant jobs in DC.
That's again, U.S.
Department of Labor, Bureau ofLabor Statistics data increased
by 7%.
(25:15):
Then we looked at overall incomeper, again, employer, employer
reported payroll data, wages andtips increased by 6.8%.
And so all of the measures thatthere's wild claims about in
terms of restaurants closing andwhat, you know, tips going away
and jobs being lost have notbeen borne out in the government
(25:37):
data.
Again, I encourage us to look atreliable government data rather
than anecdotal data or claims.
Um and again, those are the datasources that the DC Attorney
General uses and that we used aswell to look at what's happened
in the district.
I do want to say somethingunusual happened in the district
that didn't happen in the otherplaces where One Fair Wage was
(26:00):
passed.
After One Fair Wage passed inDC, the Restaurant Association
actually pretty openly toldrestaurants all you have to do
is switch from tips, which arethe property of workers, to
service charges that are theproperty of owners and take the
money that you need to cover thewage increase out of the service
charge and use it to cover yourlabor costs.
(26:22):
This is not what the 75% ofvoters who voted yes on the
proposition were expecting ofrestaurants.
The minimum wage is a socialcontract between employers and
workers.
And when the people of theUnited States say we need to
raise the minimum wage becauseit's too low, because workers
cannot afford to live on thesewages.
(26:44):
When the people of the UnitedStates say that, they're
expecting employers to pay moreand to figure out through
prices, through their businessmodel, how to pay more to
workers because workers need tobe paid more as human beings
with families and who areconsumers themselves and
contribute to our economy andpay taxes.
(27:05):
We expect employers as a so inthe social contract to pay
workers enough to survive, tonot be on public assistance.
And so when the voters of DCvoted to raise the minimum wage,
they did not expect employers totake that money from workers.
They expected employers toactually figure out how to raise
(27:26):
the minimum wage, as happenedwith$15.
And frankly, Arun, as happenedwith every other worker that's
gotten a minimum wage increasein the last century in the
United States.
Instead, this industry said, wedon't want to have to pay more.
We don't want to take it out ofour profits.
We don't want to, we refuse.
And so we're going to take itout of the workers' gratuities.
(27:47):
And so they switched many ofthem from tips to service
charges and told did not tellconsumers what they were doing
with that money.
I think they were surprised bythe amount of consumer backlash.
Consumers were furious at theRestaurant Association and
restaurants in D.C.
I remember seeing very longlists on Reddit of consumer
(28:08):
boycotts against restaurants,not at all organized by us, by
consumers who are angry atrestaurants for putting very
confusing service charges ontheir menu.
Finally, the DC Attorney Generalcracked down on the issue and
actually put out guidance sayingrestaurants must indicate very
clearly, not just, oh, this isgoing to workers, but is it
(28:31):
being used as a tip, meaningpassed on 100% to workers, or is
it being used by the employerfor the labor costs that we as a
society per social contractexpect them to pay as the
minimum that they pay theirworkers, the minimum wage?
And so that confusion diddissipate with the DC Attorney
General's guidance.
(28:51):
And now every time we areadvancing policy in other
states, watching what theRestaurant Association did in
DC, we are similarly includinglanguage that says service
charges are need to be clearlyexplained on the menu.
Is this actually being passed onto workers or is it being used
by the employer to cover laborcosts?
SPEAKER_01 (29:11):
Let me uh retrace uh the beginning.
You said that, and I did see thereport that there was an
increase in restaurant licenses.
Are you attributing that to anincrease in the wage?
SPEAKER_00 (29:23):
And actually in the report, we say there hasn't been
a full increase in the wage.
The wage has gone from five thusfar to eight dollars an hour.
So we have not gone all the wayto the minimum wage.
There's been a bare increase ofthree dollars.
So we are not claiming thateverything's better because the
wage went up.
We are refuting the notion thatas the wage increases, you
(29:45):
started the conversation sayingrestaurants are closing, prices
are going up, all of thesethings are happening.
And I'm asking you to look atthe government data, which does
not show that.
SPEAKER_01 (29:56):
Right.
Okay.
So you also talked about how youare expecting the restaurants to
pay for the increase eitherthrough raising menu prices or
through their own operatingexpenses.
And the restaurant owners claimand the operators claim that
this makes it unsustainablebecause historically tips have
(30:19):
been the, you know, the tipcredit system has been in place.
So their entire economy is builtaround this tip credit system.
And TJ Callahan on the podcastbefore that he sent me his
financial statements for theentire year.
And I was not able to figure outhow he could what he would do to
be able to pay that uh if he wasforced to go up to the minimum
(30:41):
wage without that.
And and his um service staffwere also making way more than
the minimum.
So I'm not sure how you thinkthat restaurants can now easily
absorb this extra expense.
SPEAKER_00 (30:56):
So change is never easy, but it is necessary.
So I guess the alternative,Arun, would be to leave wages
exactly as they are forever.
And we've not agreed to that forother workers.
We have, as a society, continuedto demand that wages go up with
the cost of living, that wagescontinue to increase with the
(31:20):
cost of living.
So, I mean, frankly, restaurantsmade the same claim when we were
trying to pass$15 all over thecountry.
How could I pause?
How could you make it work?
Here are my here are myexpenses.
What can I do?
And when policy required allbusinesses to go up, they
figured it out.
They figured it out.
(31:41):
And in fact, the CFO of Denny'sin California, actually
nationally, said that Denny's isgrowing faster in California
than any other state in the USbecause we pay our workers now
$16.50 plus tips.
And because those workers dowhat?
They now can eat out at Denny's.
They bring their families to eatat Denny's.
So actually, guest receipts arehigher and the company grows
(32:04):
faster.
So uh I'm not saying that peopleit's going to be very easy and
everybody can do it right atonce, which is why in every
policy that we've implemented,these are phased-in increases.
But frankly, they're phased-inincreases that are exactly the
same as the phased-in increasesthat every other business has
(32:25):
had to go through as the minimumwage goes up in other sectors
across the board, in othersectors.
So we can't have one industrywhere wages stagnate forever and
other industries where weacknowledge wages have to go up.
Uh and we can't have oneindustry that is getting away
with not paying their workersthe minimum wage while every
(32:45):
other industry is responsiblefor paying their workers the
minimum wage, again, per thesocial contract, that employers
pay for the value of the laboruh through a minimum wage that
we've agreed on as a society isnecessary to ensure workers
don't get paid less by theirbosses.
Trevor Burrus, Jr.
SPEAKER_01 (33:02):
Yeah.
But let me push back at the factwhere you say that um restaurant
wages would stagnate, where allthe other industries would go
up.
If the minimum wage goes up inany state, if you know if if in
uh California it goes up to$20an hour for everyone, that also
includes restaurant workers.
SPEAKER_00 (33:19):
So yes, in California, but not in most
places.
In fact, I don't know if youknow the history federally, 1991
was the last time thesub-minimum wage for tipped
workers went up.
1995, the overall minimum wagewent up in Congress.
And at that time, Herman Cainwas the head of the National
Restaurant Association, struck adeal with Congress that they
(33:41):
would allow the overall minimumwage to continue to increase,
and it did, as long as the subminimum wage for tipped workers
stayed frozen and it has since1995.
Since 1991.
SPEAKER_01 (33:54):
So even the federal minimum wage has not gone up for
quite some.
SPEAKER_00 (33:58):
It went up actually that year.
It it went up, it has gone up.
It went up to 515 that year in1995 and then to 725 in 2009.
And during those two increases,the sub minimum wage for tipped
workers stayed at$2.13 an hourbecause of this argument by the
Restaurant Association that it'sokay to raise everybody else's
(34:19):
wages, but the sub-minimum wagefor tipped workers should remain
frozen at$2.
SPEAKER_01 (34:24):
Aaron Powell But those workers would continue to
make the$725 minimum, which isthe minimum wage, because the
employers have to make up thedifference.
SPEAKER_00 (34:33):
Not if there's an 84% violation rate, according to
the U.S.
Department of Labor, at themoment of the highest levels of
enforcement of that issue.
SPEAKER_01 (34:42):
This 84% statistic is staggering, and obviously
we'll have to look more andmaybe provide more uh sort of
you know research into thisissue.
And and if it is a very, veryold number when you know recent
statistics, I'm not sure how oldthis 84% statistic is.
Trevor Burrus, Jr.
SPEAKER_00 (34:59):
It's about 10 years ago.
Okay.
But that was the moment of thehighest level, like there has
been no further higher levels ofenforcement.
I have spoken with the U.S.
Department of Labor currentlyunder Biden.
Again, they say the restaurantindustry is the number one
violator of wage and hour lawsof all industries in the United
States.
Um, and they are looking atpublishing a new set of data on
(35:22):
this same issue, but they havedefinitely confirmed that there
is no other data, there's noother industry with higher
levels of violation of thesetwo-tiered wage systems than
restaurants.
You don't even have to go therethough.
More recently, uh theMassachusetts Department of
Labor and Attorney General'soffice actually published data
that was shared at the hearingin um, I believe that was early
(35:45):
March, uh here in Massachusettson this issue, on our ballot
measure, uh, and had staggeringdata showing an overwhelming
number of violations on thisissue with regard to employers
actually ensuring that tipsbring you to the full minimum
wage or making up thedifference.
They also indicated that therestaurant industry is the
(36:07):
number one source of violationsof the law.
SPEAKER_01 (36:11):
I'm really having a hard time reconciling this 84%
or this staggering number ofviolations which you say with
the fact that, you know, upscalerestaurants where the average
check is pretty high, thoseworkers, we don't even have to
go into any detail.
They are making way more thanthe minimum wage.
Then you have all the nationalchains that are presumably using
(36:37):
payroll services or very stronginternal control in-house
systems where they would ensurethat they are meeting the wage
laws.
Otherwise, you know, they'd bein big trouble with auditing and
so forth.
So we are down to a much smallersegment of restaurants that
potentially can violate this,but that but that number doesn't
(36:59):
reconcile with the 84% numberthat you cite.
SPEAKER_00 (37:03):
I think you you uh you are giving a lot of credence
to employers, all of theemployers that you have just
cited.
So we have received any number,a large number of wage theft
complaints from workers in finedining restaurants.
Yes, some people may make a lotof money sometimes, but people
(37:23):
regularly experience slow shiftseven in fine dining.
Here in Massachusetts, peopleregularly experience slow shifts
when the weather is extreme.
People regularly experience slowseasons even than higher
seasons.
People regularly experience bothviolations of wage and hour
laws, you know, either anemployer taking a portion of the
(37:44):
tips, or the tips beingimproperly shared, or the tips
not bringing people to the fullminimum wage, or very frequently
very high levels of sexualharassment that occur from
having to live on tips.
So that occurs even in finedining.
Then in the chains, I've alreadyshared, I've heard countless
stories of workers experiencingwage theft at IHOPS and Denny's
(38:06):
and Applebee's.
Being a large corporation, Arunhas never, has never ever been a
full stop barrier againstbreaking the law.
In fact, sometimes the chains,the large corporations are the
greatest violators of the law.
We see that in a number ofindustries, including the
restaurant industry.
How do they do it?
Well, I already, I've seen itmyself.
(38:26):
In fact, in litigation with avery large company, they sent us
uh they had they had to, in asubpoena, send us all their
payroll records.
And they had actually blackedout, uh, like change the number
of hours somebody worked, changethe amount of tips somebody
received.
So we have seen them violate thelaw.
(38:47):
It happens.
I don't know how you can assumethat because they're a large
corporation, they don't breakthe law ever.
That's honestly the contrary ofmost people's experiences with
large corporations.
They break the law with immunityregularly.
And in fact, right now, thatNational Restaurant Corporation,
which is National RestaurantAssociation, which is led by the
(39:08):
chains, has bills moving in 22states to weaken child labor
laws.
Why?
Because they have soconsistently had very young
people break, you know, they arebreaking the law by hiring very
young people, and they now wantto do it with immunity.
So they are trying to weakenchild labor laws so that they
can continue to do what they'vebeen doing, which is having very
(39:29):
young people working inrestaurants.
In one of the houses of theWisconsin legislature, they got
a bill passed to have13-year-olds serving alcohol in
bars.
Now that was happening already,and they are looking for
immunity to do that.
So this idea that somehow therearen't violations of the law in
large corporations is verynaive.
It's very naive because we'reseeing massive amounts of
(39:52):
violations of the law in thesecorporations.
SPEAKER_01 (39:55):
So um so it's very clear that restaurant owners,
operators are opposed to yourballot initiatives.
Um so clearly they're notproviding you with funding to
continue your battle.
Um so who is so are this theserving staff, the the
bartenders, the busers are theyin support of your initiative?
(40:18):
And and who's funding yourcampaign nationwide to eliminate
uh the tip credit?
SPEAKER_00 (40:24):
Yeah.
So we've done both surveys andpolling of tipped workers.
Polling meaning uh, you know,hire a polling firm that uses,
you know, very objectivemethodology for every poll to
ask workers do they want this ornot.
And in Massachusetts, we did apoll with a polling research
(40:46):
firm of tipped workers.
Over 70% said yes, we want afull minimum wage with tips on
top.
More recently, we did surveys ofthousands of workers.
About 90% said yes, we want afull minimum wage with tips on
top.
But you don't actually have tolook at these surveys and polls.
I think you should look at thefact that we are still in the
(41:06):
most acute staffing crisis inthe history of our industry.
Workers have demonstratedwhether they're willing to work
for these wages through theirfeet.
And the fact that restaurantsare still struggling to find
people is an indication thatthis is not working.
People are still not willing tocome back in the numbers that
they were.
We lost 1.2 million workersduring and after the pandemic.
(41:30):
Most of those workers did notcome back.
The fact that the industry hassuch high levels of turnover,
why do you think that is?
Do you think that's becauseworkers just enjoy leaving their
jobs frequently?
No.
It's because nobody can stayover the long haul with such low
wages.
And we actually did work withRose Dr.
Rosemary Batt at CornellUniversity School, you know, in
(41:52):
School of Industrial LaborRelations to study turnover in
the restaurant industry, whichis ridiculously high.
We found that you can cut youremployee turnover in half by
providing a full stable wagewith tips on top and providing
people with the opportunity tomove up the ladder.
Those things matter in terms ofreducing turnover.
I mean, frankly, that's amanagement 101 idea.
(42:16):
You know, you pay people well,you treat them well, they stay.
And so I don't think you need tolook at polls and surveys.
You can to see whether workerswant this.
I think you can look at the factthat workers are not staying in
these jobs.
They're not coming and they'renot staying in these jobs to
know that the system is notworking.
Aaron Powell Right.
SPEAKER_01 (42:33):
And so there are a lot of restaurants that have
already moved since they arethere, um they're not able to
get employees.
So so the question is, how isyour nonprofit being funded?
Who out of these stakeholders isactually saying, yes, we want
this and and you know, there isthe money to help you wage the
battle?
SPEAKER_00 (42:52):
Aaron Ross Powell Well, workers are saying they
want this and they're out therecollecting signatures.
So they may not have moneybecause they have or they're
paid$6.75.
So they don't have the fundsthat the National Restaurant
Association and the employersyou're speaking to have to
fight.
They have their time, you know,and even that is very difficult
because they're often workingtwo and three jobs.
(43:12):
So it's workers leading theeffort.
It's workers who actually,frankly, asked us to come to
Massachusetts and lead theeffort.
And there are donors who supportworkers who believe in economic
equality and racial equality andgender equality who support our
work.
SPEAKER_01 (43:26):
Aaron Powell Okay.
Um, so uh the one other, youknow, there is this ballot
initiative that you'responsoring has two elements to
it.
One element, of course, is toremove the tip credit.
The other element is that youwould employ, you would allow
employers to pool with the backof the house staff as well,
everyone who's earning an hourlywage.
So in on one hand, the increasein the removal of the tip credit
(43:52):
would increase their earnings.
On the other hand, the poolingof the tips would decrease their
earnings.
So how does that Help you toincrease the earnings of this
the tipped staff?
SPEAKER_00 (44:05):
It doesn't actually work like that.
And we've actually looked at soevery other c state in the
United States except for NewYork allows for tip sharing with
all non-management staff onceeverybody's paid a full minimum
wage with tips on top.
So we would never agree to tipsharing with back of house
unless and until workers arepaid a full minimum wage, as
(44:29):
they are with tips on top, asthey are in California, Oregon,
Washington, Nevada, Minnesota,Montana, and Alaska.
Now we've done what's calledquintile research.
We've looked at the fivequintiles of tipped earners in
California, from the top earnersat the Ritz-Carlton in San
Francisco to the bottom earnersat the IHOP in San in Br Fresno
or Bakersfield and compared thatto their comparators, quintiles
(44:53):
in Massachusetts.
And we see for every quintilefrom the top to the bottom, even
with tip sharing, even getting afull minimum wage with tips on
top and tip sharing, Californiaworkers are earning
significantly more.
The top tip earners inCalifornia are earning
significantly more than the toptip earners in Massachusetts.
(45:14):
Why is that?
Because the increase from 675 to1650, which is what we're paid
in California, is$10.
You don't share$10 worth of tipsper hour.
You share maybe a few dollars,if that, in tips with other
people.
So the overall increase that youget in both wages and tips,
(45:36):
because you continuously havesaid it's 20% across the board,
it doesn't change state tostate.
You've said that over and overagain.
And so if that's true, as wagesgo up, tips go up, and so
tipping is more in those states.
And so as tipping is more,there's more to share.
And with the wage increase andhigher tips, even with tip
(45:58):
sharing, workers in Californiaat every quintile are making
more.
SPEAKER_01 (46:03):
Well, the other way to look at it is say prices in
California are higher foreverything.
And so the percentage of tips.
Yeah.
So Saru, yeah, the vision thatyou provide of California is
that it's perhaps at odds withthe rest of the country thinks
of California where peopleleaving the state and businesses
are.
SPEAKER_00 (46:22):
I also agree with you that rent is higher.
Absolutely.
No questions asked.
I'm so sorry.
I was refuting the idea thatrestaurant menu prices are
higher.
So I would ask you to right nowgo online and look at the
Applebee's in Fresno orBakersfield where the wage is
1650, and look at the Applebee'shere in Boston where the wage is
675, you're going to see theexact same menu prices.
(46:44):
Now, I'm not saying that therecan't be some modest menu price
increases as wages go up.
I'm saying that over time, whatwe find is actually a
dissipating of significant menuprices because what happens?
I'm going to come back to theCFO of Denny's, who said that as
wages went up for them inCalifornia, Denny's workers were
(47:07):
able to eat at Denny's, guestreceipts were higher.
The company grew.
And so it isn't all about menuprice increases as wages go up.
You experience less turnover.
That's a savings.
You experience higher retentionrates, that's a savings.
You experience more guestreceipts, higher traffic.
So that's a, that is a that'srevenue.
(47:27):
So I don't think it's a, it'snot a it's please understand,
it's not a one-to-one thing.
It's not like one dollar of wageincrease results in one dollar
of menu price increase.
In fact, economists have seen ait's about 12%.
12% to go, that was when we werelooking at a federal bill to go
from$2.13 an hour to 15.
(47:48):
12% phased, 12% menu priceincrease over eight years.
That was the phase out of thebill at the federal level.
Eight years, your burger wouldgo from$10 to$12.
That is not these, you know,enormous menu price increases
that we're talking about.
That is very modest and franklyless than what we've experienced
(48:11):
in gas prices and food pricesincreases over the last couple
of years.
Aaron Powell Right.
SPEAKER_01 (48:17):
You know, so I I just want to uh talk about that
when you cited the example ofBakersfield versus
Massachusetts.
Um, you know, if you go to NewYork and you have this famous$1
slice of pizza, you don't findthat anywhere.
So it's the profit margin perand the volume of traffic that
is generated, which is alsopartly responsible for them
(48:39):
being able to sell at that lowprice versus other people.
Other places are not able tosell that pizza.
So um with the passage of this,I expect that people will see a
little bit higher prices uh whenthey go out to eat more.
To end it all, to wrap up thissegment, I have a quick round of
lighter questions for ourlisteners to get to know you
(49:01):
better.
So what's your favorite leisuretime activity other than eating
at restaurants?
SPEAKER_00 (49:07):
Uh reading or spending time with my children.
SPEAKER_01 (49:10):
What are who are your heroes who are making a
positive difference on anational or worldwide level on
any issue of critical importanceto society?
SPEAKER_00 (49:18):
Aaron Powell First, I have to say I'm a worker
organizer, workers.
Uh, over the last several years,we saw 1.2 million workers,
mostly young people, oftenwomen, demand more, walk off the
job and say, this isn't workingfor me, and demand more.
And that for a low-wage workerwho who is facing how do I pay
the bills, how do I pay therent, to say, you know what, I'm
(49:40):
worth more takes enormouscourage, enormous courage,
enormous, enormous strength andresilience.
And I, and so that's my numberone hero.
Um, I would love to nameincredible restaurant owners
that have been working with uson this over the years all over
(50:01):
the country, incrediblerestaurant owners, um,
Zingermans in Michigan,incredible restaurant owners
who've been supportive ofraising wages here in
Massachusetts, uh, Mamala's anduh Irene Lee from uh May May and
Bip Lau Rao from Comfort Kitchenand many others have been
leading voices on this issue,have been very supportive of
(50:22):
these issues.
So I think both workers andemployers in this industry are
who guide me in terms of thiswork.
There is clearly a better way ofdoing things that's better for
all.
SPEAKER_01 (50:33):
What is the favorite food that you enjoy most at
restaurants?
And do you feel safe eating atrestaurants?
SPEAKER_00 (50:40):
Um I feel safe eating at restaurants most of
the time.
I obviously wouldn't go toplaces that um, you know, where
people have done some very bullengaged in some very bullying
behavior towards me and workers.
So where I go, I feel safebecause I choose to go to places
that align with my values.
(51:00):
Um, that are I'm I'm vegan, so Ilike to go to places that have
vegan options and that alignwith my values.
SPEAKER_01 (51:07):
Thank you, Saru, for joining us once again.
It has been an engagingconversation on a very important
topic.
Thank you.
Thank you.
And thank you all for listeningtoday to our distinguished
podcast.
If you like what you're hearing,be sure to follow up and give us
a five-star rating.
If you want to join theconversation and share your
thoughts and suggestions, emailme at shaden at bu.edu.
(51:32):
That's shawdeen at bu.edu.
Special thanks to the team whoproduced this podcast, Mara
Littman, Andy Halleck, and theentire team at BU School of
Hospitality Administration.
To keep up with theDistinguished Podcast, be sure
to subscribe wherever you listento your favorite podcast.
You can also learn more aboutour undergraduate and graduate
(51:53):
programs at BU School ofHospitality by visiting pu.edu
slash hospitality.
Have a wonderful day and thankyou for listening.
Welcome to the Distinguished Podcast.
I'm your host, Arunukneja, Deanof the Boston University School
of Hospitality Administration.
Today we are poised for athought-provoking conversation
with Saru Jayrahman, thepresident of One Fair Wage, on
the transformative potential andthe contentious debates
surrounding dipping and fairwages in hospitality.
(00:26):
Our commitment at BU is toprepare future leaders who are
equipped to navigate and shapethe industry landscape,
embracing innovation whilescrutinizing proposed changes to
ensure they serve the greatergood.
Saru, welcome back to BiusSchool of Hospitality and thank
you for joining us to explorethese pivotal issues from
(00:46):
multiple perspectives.
SPEAKER_00 (00:48):
Thank you for having me.
SPEAKER_01 (00:50):
Please note that the one fair wage position from our
teen's distinguished talk inFebruary this year is available
on the Biou School ofHospitality YouTube channel.
So let's start Saru with thebasic question.
When we talk about the ballotinitiative to eliminate the
subminimum wage, theMassachusetts Restaurant
Association argues that thesubminimum wage, the term
(01:14):
subminimum wage is inaccuratebecause the tipped wage laws,
every tipped employee isguaranteed minimum wage, which
could be a combination of tippedwage and tips.
So if tipped employees areearning the minimum wage, and in
many cases well above theminimum wage, what's the
justification for framing thetipped wage as a subminimum
(01:34):
wage?
I know it's just semantics, butthat framing conveys information
to the readers, listeners, whichmay not be accurate.
SPEAKER_00 (01:42):
So uh the sub minimum wage is important to
understand in a both historicand current context.
Um, historically, the subminimumwage for tipped workers was
created to allow restaurants tohire newly freed black women
after emancipation to for freeand tell them they were going to
live on tips.
It's important to note thatprior to emancipation, waiters
(02:05):
in the United States, in Boston,were white men who got full
wages, no tips.
And the wage, the value placedon these workers went down from
a full minimum wage to no wage,just as the population of these
workers changed from white mento black women.
And so I don't know how youunderstand that.
Sub means less than.
(02:27):
I don't know how you understandgoing from a full wage to no
wage based on the identity ofthe population, other than
calling it less than a minimum,less than what it was.
And that idea that thispopulation of mostly black women
could get no wage, only tips,became law in 1938 as part of
(02:48):
the New Deal when all otherworkers received a federal
minimum wage for the first time.
But again, these workers weregiven zero dollars.
They're told you can be paid aslittle as nothing because you're
getting tips.
And we went from$0 in 1938 to$2.13 an hour.
Now we continue to call that asub-minimum wage because it is
(03:09):
far less, sub, far less than theactual minimum wage paid by
employers, not by customers, notby anybody else.
But what is the employer payingthe worker?
Actually, the social contractthat comes from the idea of a
minimum wage, it's a contractbetween the employer and the
worker, not anybody else, notthe customers, not the
(03:30):
government.
The minimum wage is the ideathat an employer pays something,
the least of something minimum,to workers.
And if we're allowing employersto pay less than that, then that
is a sub minimum.
But more importantly, in thiscurrent day and age, you said
that the Restaurant Associationclaims that, you know, federal
law says tips have to bringworkers to the full minimum wage
(03:52):
or the employer makes up thedifference.
So let's examine whether that'sactually happening.
So in from 2009 to 2011, theU.S.
Department of Labor under theObama administration actually
conducted a very thoroughinvestigation with thousands of
restaurants to see whether therules and laws surrounding this
two-tiered wage system werebeing compliant with.
(04:13):
They found an 84% violation ratewith regard to employers
actually ensuring that tipsbrought you to the full minimum
wage or they would pay thedifference.
At that point, the SolicitorGeneral of the U.S.
Department of Labor, PatriciaSmith, declared the issue
unenforceable.
She said, it is so complicated,it is so much for small
(04:34):
businesses and large businessesto have to go back hour by hour
and figure out whether workersgot the tips they need to bring
them to the minimum wage or paythe difference.
It's so complicated for them,it's impossible for us as a
federal agency, which franklyhas a lot more uh power and
resources than a statedepartment of labor like
Massachusetts.
So she said this isunenforceable.
(04:55):
That is the point at which theObama administration actually
changed their stance from beingfor a subminim wage for tipped
workers to saying, no, we need afull minimum wage with tips on
top.
But more recently, that wasabout a decade ago, more
recently, we have surveyed herein Massachusetts and around the
country thousands of workers.
Our most recent survey of over2,000 restaurant workers, over
(05:18):
50%, actually closer to 57% ofworkers say, I regularly do not
receive a full minimum wage withtips.
It happens when days are slow.
And so as long as workers saythey're consistently not
receiving the full minimum wagewith tips and employers are not
making up the difference, itcontinues to be a subminimum
(05:40):
wage.
SPEAKER_01 (05:40):
So there are two big issues here.
One is the historical context,and I'm going to return to that
in a in a minute.
But let's talk about thisenforcement.
And you and you said you cited astatistic that 57% of staff have
said that they consistently donot receive this.
Where are you getting this 57%number from?
SPEAKER_00 (06:01):
So we, as one fair wage, have been conducting
surveys of restaurant workers.
I mean, I'm also an academic, sowe conduct surveys across the
country.
We have been for 20 years.
Our most recent survey wasfunded by the Robert
Wood-Johnson Foundation.
They funded us to do a big studyof restaurant workers.
We actually, you know, set up apretty rigorous meth meth method
(06:23):
of, you know, with a surveyinstrument and had paid
surveyors out conducting surveyswith restaurant workers.
57% of the over 2,000 workers wesurveyed said they are regularly
not receiving the full minimumwage with tips.
They didn't say it was all thetime, every shift, but they said
it happens pretty consistentlythat there's a slow shift or uh,
(06:46):
you know, a slow day.
The tips don't bring them to theminimum wage, and the employer
does not make up the difference.
SPEAKER_01 (06:51):
Aaron Powell I'm sure that um restaurant owners
would differ.
And I wonder if there is, youknow, there to some extent,
since this is what you'readvocating for.
SPEAKER_00 (07:03):
I think even if restaurant workers want to
differ over our data, I wouldencourage you to look at two
sources of data.
The U.S.
Department of Labor analysis ofthis issue from 2011-2012, and
again, uh more recently, U.S.
Department of Labor Bureau ofLabor Statistics data, which
shows the median wage for tippedworkers in the United States.
(07:25):
Right now, the median wage fortipped workers in Massachusetts
hovers just around the minimumwage, which tells you that more
than half I mean, about half ofworkers, because median means
it's the middle, means that halfof tipped workers earn less than
the minimum wage consistently.
That's employer-reported payrolldata, Arun.
So that's not me, that's noteven workers.
(07:48):
That's what employers arereporting to the U.S.
Department of Labor as theirpayroll data.
If half, about half of workersare saying they earn less than
15, that means that TIPS areregularly not bringing workers
to the full minimum wage andemployers are not paying the
difference.
SPEAKER_01 (08:05):
The the the restaurant operators I speak to
and I've spoken to, and thosewho have yelled at me as well,
many of them have told me, andthey are from upscale
fine-dining establishments, andand they say that their staff,
their bartenders, their servers,their are routinely earning in
excess of$80,000 a year.
(08:25):
So that is clearly nowhere closeto the median or the or even the
minimum wage is way beyond.
SPEAKER_00 (08:31):
Right.
But that that is purelyanecdotal.
I think as academics, we have tolook at the most reliable source
of data.
It's not anecdotal.
Uh it is either survey data oreven more even better,
government data.
And again, this is what I'mreferring to as
employer-reported payroll data.
(08:52):
So either employers are notgiving the correct information
to the U.S.
Department of Labor, or they'renot telling you the right
information now.
It has to be one or the other.
But the but the Again, youcannot make policy in
Massachusetts or in the UnitedStates based on anecdotes or
what individuals say.
You have to make policy based onwhat is the median, what is the
(09:15):
average experience, what is theoverall experience.
I am sure there are servers inBoston that who sometimes make a
lot of money in tips.
I'm sure those workers even makeless when there are blizzards or
there are bad days or very hotdays.
Climate change is impactingworkers' tips.
I'm sure there are times wheneven the highest tip earners
(09:37):
experience economic instabilitybecause that is the nature of
tips.
But you cannot look at thehighest tip earners.
You cannot look at therestaurants where tips are
highest.
You have to look in creatingpolicy at what is the overall
experience of tipped workers inMassachusetts.
And looking at the overallexperience of tipped workers in
Massachusetts, they have atleast double the poverty rate of
(10:01):
workers in other industries.
They are using food stamps at atleast double the rate of other
workers in other industries.
And food stamps is a really goodmeasure, Arun, because people do
not apply for food stamps to goto the prom or to, you know, get
some extra income to like, Idon't know, do something fun.
Food stamps are very hard andstigmatized to apply for.
(10:24):
And so if you're going afterfood stamps and actually
obtaining them, you've gonethrough a rigorous, stigmatized
process because you cannot feedyourself and your children.
So the fact that tipped workersin Massachusetts use food stamps
at double the rate of otherworkers, to me, is that's all
you need in terms of data toknow that there's a problem
(10:44):
here.
SPEAKER_01 (10:45):
So let's go back to this historical um actually
before we go back to thehistory, um, I had um Dr.
Mike Lynn from Cornell um uhhere as a guest on the podcast,
and I was asking him, okay, sowhat are the factors that
determine tipping?
And pretty much he said mostpeople on average are tipping at
(11:08):
about 20%.
So the the other statistics thatyou are sh that you are citing,
which I need to obviously goback and look at them, um, are
at odds with the generalpractice where this extensive
research is found that mostpeople are going to tip at at
that high level.
SPEAKER_00 (11:27):
How how are they at odds?
Well, because if you work atIHOP and Denny's and your
pancake is less than five, eightdollars an hour, twenty percent
of five is one dollar.
So most people do not work atrestaurants where the bill is
(11:48):
$100 and you get a$20 tip.
Most people work at very casualrestaurants where prices are far
less and tipping is as a result,as a percentage, far less and
not enough to live on for aworker who earns$6.75.
So the worker at the IHOP isearning$6.75 with 20% of a$10
(12:11):
meal, and the worker at a fancyfine dining restaurant is
earning$675 with 20% of a$100meal.
So the worker at the IHOP isgetting at most$2 for one
person's meal.
The worker at a very fancy finedining restaurant is getting$20
for one person's meal.
So it's not at all at odds withwhat I'm saying.
Aaron Ross Powell Right.
SPEAKER_01 (12:31):
But the thing, the the the server at the IHOP or
Denny's is not just serving onecustomer who is ordering$10
worth of stuff.
In one hour, you know, if theyif they serve ten customers, and
let's assume the average bill isten dollars per person, that's a
hundred dollars, and then youare you're getting fifteen or
(12:52):
twenty dollars in tips inaddition to your six
seventy-five.
SPEAKER_00 (12:55):
So you're still way beyond the assuming you get ten
people in an hour at Diney's inan overnight shift, number one.
But you're also forgetting arune that waitresses servers do
not keep their tips all tothemselves.
They share it with busers andrunners and bartenders and other
people in the restaurant.
(13:16):
So they're not keeping, youknow,$15 or$20 in an hour.
At most, maybe they keep$10.
Maybe that's lucky, you get$10in tip in an hour.
Add that to$6.37.
That's$16.
So you are getting about sixthat you're getting about the
minimum wage, which is exactlywhat I said at the beginning.
(13:37):
The median in Massachusettshovers around the minimum wage,
including tips, which means youhave to understand that there's
a significant portion of peoplewho earn less than that, because
that's the median.
SPEAKER_01 (13:50):
Yeah, I think we need to also get a small
restaurant or maybe a Denny's oran IHOP owner to get some more.
SPEAKER_00 (13:56):
I don't know that owners are ever going to tell
you, you know, I think you needto have a worker.
If you I mean, have you ever hada worker on your podcast?
I I would bring- I would love tobring a worker who can share
what it's like, exactly whatthey earn in tips, ex exactly
the many instances where youhaven't had tips and you end up
not getting the full minimumwage, what that feels like, and
(14:20):
the precarity of sometimesgetting it, sometimes not, the
vulnerability that comes withthat as well.
So you've spoken to a lot ofowners on this podcast.
I would encourage you to speakto I we're happy to bring you
workers who can share theirexperience.
SPEAKER_01 (14:34):
Right.
I think in addition to workers,but like you said a few minutes
ago in the podcast, those areall anecdotal evidences.
I think we also need to go tothe companies that are providing
the payroll services to see howtheir systems are set up if they
are doing this on an hourlybasis and doing the
calculations.
Because most restaurantcompanies would probably hire
(14:58):
some payroll companies thatprovide the payroll services.
Yeah.
SPEAKER_00 (15:01):
But that that so I will give you an example.
I spoke to a an IHOP worker whosaid TIPS consistently did not
bring her to the full minimumwage, but the employer told her,
you better report that you areactually earning the minimum
wage in TIPS because I don'twant to have to deal with the
difference.
I don't want to deal withcorporate telling me you're not
earning enough.
I don't want to deal withcorporate getting upset with me
(15:23):
for having the company having topay the difference.
That happens all the time.
And so uh workers are then askedto report on income they're not
actually earning.
Uh they get retaliated.
Their boss is telling them to dothis, so they get retaliated.
So I would encourage you, if youdon't want to speak to workers,
speak to the MassachusettsDepartment of Labor or the U.S.
Department of Labor.
(15:44):
Those are sources of aggregatedata, again, employer-reported
payroll data that are much morereliable than anecdotal evidence
from employers.
But as long as you are talkingto employers, I encourage you to
also talk to workers.
But if you want the mostreliable aggregate data, I would
say the U.S.
Department of Labor is the placeto go or the Massachusetts
Department of Labor.
SPEAKER_01 (16:05):
Aaron Powell I think you have already identified a
few more guests that we need toinvite to report the workers.
But to be fair, um a lot of whenyou say that the employees are
are sort of forcing the workersto report tips, but those are
cash tips.
And most people now are payingwith credit cards.
(16:26):
Those trips are automatically.
SPEAKER_00 (16:36):
IHOPS and Denny's, Apple's, these are places where
you still see elderly people ona fixed income eating and often
paying in cash because that'swhat they feel most comfortable
doing.
SPEAKER_01 (16:48):
Aaron Ross Powell So number one, it's an enforcement
issue that the government is notenforcing its own laws.
And to counter that, we are nowtrying to change the system for
everyone, including the staffthat are making way above the
minimum.
SPEAKER_00 (17:03):
I would argue it's more much more than an
enforcement issue.
As I mentioned from thebeginning, this was a system
created to basically allowrestaurants to access free black
female labor.
And even if in this moment youhad 100% compliance with the
law, even if every employerensured that TIPS brought
(17:24):
workers to the full minimum wageor paid the difference, you'd
still to this day, from 1865,have a population overwhelmingly
women, disproportionate women ofcolor, highest rates of single
moms of any occupation, andhighest rates of sexual
harassment of any occupation.
You'd still have a populationthat's getting the majority of
their income from the whims andbiases of customer tips.
(17:47):
The professor Michael Lynn haspublished data in the past that
shows that tipping isoverwhelmingly biased.
It's actually very correlatedwith the race and gender of the
server.
And so black women consistentlyget tipped less than white men.
And we have the highest rates ofsexual harassment of any
industry because when a woman isforced to get a majority of her
(18:11):
income from customers whosebiases and behavior are going to
impact whether or not she getstipped at all or tipped well,
that means she has to put upwith whatever the customer does
to you, however, they treat heror talk to her or touch her
because she's reliant on theirincome, not the$6 to pay her
bills.
(18:31):
The$6 is so low, it goes totaxes.
And so she truly is completelydependent on her customers to
feed her family.
And again, that makes her veryvulnerable to all kinds of abuse
and harassment.
SPEAKER_01 (18:45):
Right.
And I think when I had aconversation with Mike Lynn, he
did say that that the 20% ispretty much standard regardless
of the level of service,regardless of who's serving you,
it's only beyond that thatpeople get more tips.
Okay, so um then I w I do wantto sort of return back to this
historical context where umwhere you talked about how uh
(19:09):
black women were being hired atat this subminimum wage.
But since then, what hashappened?
Has there been a change in thesociety?
And well, at that time tippingwas not expected, but now
tipping has pretty much becomestandard in restaurants.
And this 20% number, which hashas increased from 15% and 15
(19:30):
years ago.
Now that has become ingrained inour society.
And people who have done theseexperiments find that that um
and I had T.
J.
Callahan from Chicago, he alsodid this experiment.
Customers want to tip.
So when you increase the wages,you increase the menu prices, or
you add a service charge, andyou say you don't have to tip
(19:54):
anymore because you've alreadyincreased the prices to account
for fair wages, then customersare unhappy with that whole
because it is ingrained in thesociety.
SPEAKER_00 (20:04):
So that is not what we are advocating for.
What we are advocating for iswhat the seven states already
require (20:11):
California, Oregon, Washington, Nevada, Minnesota,
Montana, and Alaska alreadyrequire a full minimum wage with
tips on top.
99% of restaurants in thosestates have a traditional model
of tips, not service charges.
And tipping is the same orhigher, as Michael Lynn has
said, in those states as theyare here in Massachusetts.
(20:33):
In fact, quarter four, 2023,which is the last set of data we
have, California had the highesttipping average of any state in
the United States, higher thanMassachusetts.
And so we're nobody's advocatingfor tipping to go away.
In fact, tipping is that same orhigher in the states that are
doing the policy that we'realready advocating for.
(20:55):
In addition, I would really haveto push back.
I don't know when you talked toMichael Lynn, but there have
been so there's been so muchresearch on press now that in
the last several years,particularly post-pandemic,
tipping has declined prettysignificantly.
As sales declined, tippingdeclined, people are
experiencing tip fatigue as moreand more establishments outside
(21:17):
of the restaurant industry tryto introduce tipping in even
retail environments becausethey're trying to access the
same exemption that therestaurant industry has.
And so as customers are beingasked to tip in many, many, many
environments, they are tippingless in general.
Just yesterday, the WashingtonPost reached out to me.
Um, there is a new survey outthat showed that 51% of
(21:41):
Americans feel it's perfectlyokay not to leave any tip at all
if they feel they they weren'tpleased with the service.
And so we regularly see thishappening.
Maybe on the whole, people tip.
On the whole, people want tokeep tipping, but we are seeing
a general tip fatigue.
Across many sectors.
(22:02):
And we are seeing definitelyinstances frequently where some
people feel it's okay not totip.
And all of these instances pointto the instability and
unreliability of tipping.
Tipping is not something you canever be guaranteed or count on.
You cannot, you say, MichaelLynn says it's 20% across the
(22:23):
board.
But that doesn't mean a workerconsistently receives 20% all
the time, every day, everymonth, every but you know what
is consistent for that worker?
They have to pay rent everymonth.
You know what is consistent?
They have to purchase groceries,and they're facing the exact
same inflationary prices in thegrocery store that you and I and
restaurant owners are facing.
(22:43):
You know what is consistent hasbeen the increase in gas prices
over the last several yearssince the pandemic.
All of those things have beenconsistent.
The wage has remained stagnant.
The one thing that is notconsistent and actually has been
declining is tipping.
SPEAKER_01 (22:58):
So the so there is a tipping fatigue, and I feel it,
and I think everyone feels it.
We go every single place we go,there is a there So there is a
tipping fatigue, but I amcurious to know if the tipping
fatigue is with all the otherplaces that have jumped into the
fray and asking for tipping, oris it even in restaurants where
(23:18):
uh with the increase in prices,with the increase in inflation,
increase in uh the the logisticsand and so the price rise that
we see and then the percentageof tips, obviously if the if the
tipping percentage is fairlysteady at 20%, with the rise in
prices, your tips would go upautomatically.
(23:38):
But I want to go back to um theexample of Washington, D.C.,
where recently there has beenthis huge and so many people
who've eaten at restaurants sendme their bills and say, look,
the price of eating out in DChas just skyrocketed.
Unfortunately, DC is not a verygood test market because there's
a lot of lobbyists, a lot ofpeople who are coming to
(23:59):
convince the government to sortof, you know.
So it's and then obviouslygovernment has deep pockets.
So it's a very uh it's not avery good test market for normal
consumers for a city like Bostonor New York and any other
places.
But their cost of dining out hasincreased and a lot of
restaurants are going under.
Of course, new restaurants keepcoming.
(24:22):
There is always optimism.
Entrepreneurs always believethey can make the difference,
but a lot of restaurants seem tobe closing shop there.
SPEAKER_00 (24:30):
So again, I encourage you to look at
government data before makingclaims.
And if you look at governmentdata, one year after the passage
of November 22's I-82, November23, the only source of
government data that the DCAttorney General relies on is
licenses to restaurants.
If you look at licenses torestaurants, they went up by 10%
(24:54):
from November 22 to November 23.
So that is the only source ofdata the government finds
reliable in terms of the numberof restaurants in D.C.
increased by 10%.
Then we looked at the number ofrestaurant jobs in DC.
That's again, U.S.
Department of Labor, Bureau ofLabor Statistics data increased
by 7%.
(25:15):
Then we looked at overall incomeper, again, employer, employer
reported payroll data, wages andtips increased by 6.8%.
And so all of the measures thatthere's wild claims about in
terms of restaurants closing andwhat, you know, tips going away
and jobs being lost have notbeen borne out in the government
(25:37):
data.
Again, I encourage us to look atreliable government data rather
than anecdotal data or claims.
Um and again, those are the datasources that the DC Attorney
General uses and that we used aswell to look at what's happened
in the district.
I do want to say somethingunusual happened in the district
that didn't happen in the otherplaces where One Fair Wage was
(26:00):
passed.
After One Fair Wage passed inDC, the Restaurant Association
actually pretty openly toldrestaurants all you have to do
is switch from tips, which arethe property of workers, to
service charges that are theproperty of owners and take the
money that you need to cover thewage increase out of the service
charge and use it to cover yourlabor costs.
(26:22):
This is not what the 75% ofvoters who voted yes on the
proposition were expecting ofrestaurants.
The minimum wage is a socialcontract between employers and
workers.
And when the people of theUnited States say we need to
raise the minimum wage becauseit's too low, because workers
cannot afford to live on thesewages.
(26:44):
When the people of the UnitedStates say that, they're
expecting employers to pay moreand to figure out through
prices, through their businessmodel, how to pay more to
workers because workers need tobe paid more as human beings
with families and who areconsumers themselves and
contribute to our economy andpay taxes.
(27:05):
We expect employers as a so inthe social contract to pay
workers enough to survive, tonot be on public assistance.
And so when the voters of DCvoted to raise the minimum wage,
they did not expect employers totake that money from workers.
They expected employers toactually figure out how to raise
(27:26):
the minimum wage, as happenedwith$15.
And frankly, Arun, as happenedwith every other worker that's
gotten a minimum wage increasein the last century in the
United States.
Instead, this industry said, wedon't want to have to pay more.
We don't want to take it out ofour profits.
We don't want to, we refuse.
And so we're going to take itout of the workers' gratuities.
(27:47):
And so they switched many ofthem from tips to service
charges and told did not tellconsumers what they were doing
with that money.
I think they were surprised bythe amount of consumer backlash.
Consumers were furious at theRestaurant Association and
restaurants in D.C.
I remember seeing very longlists on Reddit of consumer
(28:08):
boycotts against restaurants,not at all organized by us, by
consumers who are angry atrestaurants for putting very
confusing service charges ontheir menu.
Finally, the DC Attorney Generalcracked down on the issue and
actually put out guidance sayingrestaurants must indicate very
clearly, not just, oh, this isgoing to workers, but is it
(28:31):
being used as a tip, meaningpassed on 100% to workers, or is
it being used by the employerfor the labor costs that we as a
society per social contractexpect them to pay as the
minimum that they pay theirworkers, the minimum wage?
And so that confusion diddissipate with the DC Attorney
General's guidance.
(28:51):
And now every time we areadvancing policy in other
states, watching what theRestaurant Association did in
DC, we are similarly includinglanguage that says service
charges are need to be clearlyexplained on the menu.
Is this actually being passed onto workers or is it being used
by the employer to cover laborcosts?
SPEAKER_01 (29:11):
Let me uh retrace uh the beginning.
You said that, and I did see thereport that there was an
increase in restaurant licenses.
Are you attributing that to anincrease in the wage?
SPEAKER_00 (29:23):
And actually in the report, we say there hasn't been
a full increase in the wage.
The wage has gone from five thusfar to eight dollars an hour.
So we have not gone all the wayto the minimum wage.
There's been a bare increase ofthree dollars.
So we are not claiming thateverything's better because the
wage went up.
We are refuting the notion thatas the wage increases, you
(29:45):
started the conversation sayingrestaurants are closing, prices
are going up, all of thesethings are happening.
And I'm asking you to look atthe government data, which does
not show that.
SPEAKER_01 (29:56):
Right.
Okay.
So you also talked about how youare expecting the restaurants to
pay for the increase eitherthrough raising menu prices or
through their own operatingexpenses.
And the restaurant owners claimand the operators claim that
this makes it unsustainablebecause historically tips have
(30:19):
been the, you know, the tipcredit system has been in place.
So their entire economy is builtaround this tip credit system.
And TJ Callahan on the podcastbefore that he sent me his
financial statements for theentire year.
And I was not able to figure outhow he could what he would do to
be able to pay that uh if he wasforced to go up to the minimum
(30:41):
wage without that.
And and his um service staffwere also making way more than
the minimum.
So I'm not sure how you thinkthat restaurants can now easily
absorb this extra expense.
SPEAKER_00 (30:56):
So change is never easy, but it is necessary.
So I guess the alternative,Arun, would be to leave wages
exactly as they are forever.
And we've not agreed to that forother workers.
We have, as a society, continuedto demand that wages go up with
the cost of living, that wagescontinue to increase with the
(31:20):
cost of living.
So, I mean, frankly, restaurantsmade the same claim when we were
trying to pass$15 all over thecountry.
How could I pause?
How could you make it work?
Here are my here are myexpenses.
What can I do?
And when policy required allbusinesses to go up, they
figured it out.
They figured it out.
(31:41):
And in fact, the CFO of Denny'sin California, actually
nationally, said that Denny's isgrowing faster in California
than any other state in the USbecause we pay our workers now
$16.50 plus tips.
And because those workers dowhat?
They now can eat out at Denny's.
They bring their families to eatat Denny's.
So actually, guest receipts arehigher and the company grows
(32:04):
faster.
So uh I'm not saying that peopleit's going to be very easy and
everybody can do it right atonce, which is why in every
policy that we've implemented,these are phased-in increases.
But frankly, they're phased-inincreases that are exactly the
same as the phased-in increasesthat every other business has
(32:25):
had to go through as the minimumwage goes up in other sectors
across the board, in othersectors.
So we can't have one industrywhere wages stagnate forever and
other industries where weacknowledge wages have to go up.
Uh and we can't have oneindustry that is getting away
with not paying their workersthe minimum wage while every
(32:45):
other industry is responsiblefor paying their workers the
minimum wage, again, per thesocial contract, that employers
pay for the value of the laboruh through a minimum wage that
we've agreed on as a society isnecessary to ensure workers
don't get paid less by theirbosses.
Trevor Burrus, Jr.
SPEAKER_01 (33:02):
Yeah.
But let me push back at the factwhere you say that um restaurant
wages would stagnate, where allthe other industries would go
up.
If the minimum wage goes up inany state, if you know if if in
uh California it goes up to$20an hour for everyone, that also
includes restaurant workers.
SPEAKER_00 (33:19):
So yes, in California, but not in most
places.
In fact, I don't know if youknow the history federally, 1991
was the last time thesub-minimum wage for tipped
workers went up.
1995, the overall minimum wagewent up in Congress.
And at that time, Herman Cainwas the head of the National
Restaurant Association, struck adeal with Congress that they
(33:41):
would allow the overall minimumwage to continue to increase,
and it did, as long as the subminimum wage for tipped workers
stayed frozen and it has since1995.
Since 1991.
SPEAKER_01 (33:54):
So even the federal minimum wage has not gone up for
quite some.
SPEAKER_00 (33:58):
It went up actually that year.
It it went up, it has gone up.
It went up to 515 that year in1995 and then to 725 in 2009.
And during those two increases,the sub minimum wage for tipped
workers stayed at$2.13 an hourbecause of this argument by the
Restaurant Association that it'sokay to raise everybody else's
(34:19):
wages, but the sub-minimum wagefor tipped workers should remain
frozen at$2.
SPEAKER_01 (34:24):
Aaron Powell But those workers would continue to
make the$725 minimum, which isthe minimum wage, because the
employers have to make up thedifference.
SPEAKER_00 (34:33):
Not if there's an 84% violation rate, according to
the U.S.
Department of Labor, at themoment of the highest levels of
enforcement of that issue.
SPEAKER_01 (34:42):
This 84% statistic is staggering, and obviously
we'll have to look more andmaybe provide more uh sort of
you know research into thisissue.
And and if it is a very, veryold number when you know recent
statistics, I'm not sure how oldthis 84% statistic is.
Trevor Burrus, Jr.
SPEAKER_00 (34:59):
It's about 10 years ago.
Okay.
But that was the moment of thehighest level, like there has
been no further higher levels ofenforcement.
I have spoken with the U.S.
Department of Labor currentlyunder Biden.
Again, they say the restaurantindustry is the number one
violator of wage and hour lawsof all industries in the United
States.
Um, and they are looking atpublishing a new set of data on
(35:22):
this same issue, but they havedefinitely confirmed that there
is no other data, there's noother industry with higher
levels of violation of thesetwo-tiered wage systems than
restaurants.
You don't even have to go therethough.
More recently, uh theMassachusetts Department of
Labor and Attorney General'soffice actually published data
that was shared at the hearingin um, I believe that was early
(35:45):
March, uh here in Massachusettson this issue, on our ballot
measure, uh, and had staggeringdata showing an overwhelming
number of violations on thisissue with regard to employers
actually ensuring that tipsbring you to the full minimum
wage or making up thedifference.
They also indicated that therestaurant industry is the
(36:07):
number one source of violationsof the law.
SPEAKER_01 (36:11):
I'm really having a hard time reconciling this 84%
or this staggering number ofviolations which you say with
the fact that, you know, upscalerestaurants where the average
check is pretty high, thoseworkers, we don't even have to
go into any detail.
They are making way more thanthe minimum wage.
Then you have all the nationalchains that are presumably using
(36:37):
payroll services or very stronginternal control in-house
systems where they would ensurethat they are meeting the wage
laws.
Otherwise, you know, they'd bein big trouble with auditing and
so forth.
So we are down to a much smallersegment of restaurants that
potentially can violate this,but that but that number doesn't
(36:59):
reconcile with the 84% numberthat you cite.
SPEAKER_00 (37:03):
I think you you uh you are giving a lot of credence
to employers, all of theemployers that you have just
cited.
So we have received any number,a large number of wage theft
complaints from workers in finedining restaurants.
Yes, some people may make a lotof money sometimes, but people
(37:23):
regularly experience slow shiftseven in fine dining.
Here in Massachusetts, peopleregularly experience slow shifts
when the weather is extreme.
People regularly experience slowseasons even than higher
seasons.
People regularly experience bothviolations of wage and hour
laws, you know, either anemployer taking a portion of the
(37:44):
tips, or the tips beingimproperly shared, or the tips
not bringing people to the fullminimum wage, or very frequently
very high levels of sexualharassment that occur from
having to live on tips.
So that occurs even in finedining.
Then in the chains, I've alreadyshared, I've heard countless
stories of workers experiencingwage theft at IHOPS and Denny's
(38:06):
and Applebee's.
Being a large corporation, Arunhas never, has never ever been a
full stop barrier againstbreaking the law.
In fact, sometimes the chains,the large corporations are the
greatest violators of the law.
We see that in a number ofindustries, including the
restaurant industry.
How do they do it?
Well, I already, I've seen itmyself.
(38:26):
In fact, in litigation with avery large company, they sent us
uh they had they had to, in asubpoena, send us all their
payroll records.
And they had actually blackedout, uh, like change the number
of hours somebody worked, changethe amount of tips somebody
received.
So we have seen them violate thelaw.
(38:47):
It happens.
I don't know how you can assumethat because they're a large
corporation, they don't breakthe law ever.
That's honestly the contrary ofmost people's experiences with
large corporations.
They break the law with immunityregularly.
And in fact, right now, thatNational Restaurant Corporation,
which is National RestaurantAssociation, which is led by the
(39:08):
chains, has bills moving in 22states to weaken child labor
laws.
Why?
Because they have soconsistently had very young
people break, you know, they arebreaking the law by hiring very
young people, and they now wantto do it with immunity.
So they are trying to weakenchild labor laws so that they
can continue to do what they'vebeen doing, which is having very
(39:29):
young people working inrestaurants.
In one of the houses of theWisconsin legislature, they got
a bill passed to have13-year-olds serving alcohol in
bars.
Now that was happening already,and they are looking for
immunity to do that.
So this idea that somehow therearen't violations of the law in
large corporations is verynaive.
It's very naive because we'reseeing massive amounts of
(39:52):
violations of the law in thesecorporations.
SPEAKER_01 (39:55):
So um so it's very clear that restaurant owners,
operators are opposed to yourballot initiatives.
Um so clearly they're notproviding you with funding to
continue your battle.
Um so who is so are this theserving staff, the the
bartenders, the busers are theyin support of your initiative?
(40:18):
And and who's funding yourcampaign nationwide to eliminate
uh the tip credit?
SPEAKER_00 (40:24):
Yeah.
So we've done both surveys andpolling of tipped workers.
Polling meaning uh, you know,hire a polling firm that uses,
you know, very objectivemethodology for every poll to
ask workers do they want this ornot.
And in Massachusetts, we did apoll with a polling research
(40:46):
firm of tipped workers.
Over 70% said yes, we want afull minimum wage with tips on
top.
More recently, we did surveys ofthousands of workers.
About 90% said yes, we want afull minimum wage with tips on
top.
But you don't actually have tolook at these surveys and polls.
I think you should look at thefact that we are still in the
(41:06):
most acute staffing crisis inthe history of our industry.
Workers have demonstratedwhether they're willing to work
for these wages through theirfeet.
And the fact that restaurantsare still struggling to find
people is an indication thatthis is not working.
People are still not willing tocome back in the numbers that
they were.
We lost 1.2 million workersduring and after the pandemic.
(41:30):
Most of those workers did notcome back.
The fact that the industry hassuch high levels of turnover,
why do you think that is?
Do you think that's becauseworkers just enjoy leaving their
jobs frequently?
No.
It's because nobody can stayover the long haul with such low
wages.
And we actually did work withRose Dr.
Rosemary Batt at CornellUniversity School, you know, in
(41:52):
School of Industrial LaborRelations to study turnover in
the restaurant industry, whichis ridiculously high.
We found that you can cut youremployee turnover in half by
providing a full stable wagewith tips on top and providing
people with the opportunity tomove up the ladder.
Those things matter in terms ofreducing turnover.
I mean, frankly, that's amanagement 101 idea.
(42:16):
You know, you pay people well,you treat them well, they stay.
And so I don't think you need tolook at polls and surveys.
You can to see whether workerswant this.
I think you can look at the factthat workers are not staying in
these jobs.
They're not coming and they'renot staying in these jobs to
know that the system is notworking.
Aaron Powell Right.
SPEAKER_01 (42:33):
And so there are a lot of restaurants that have
already moved since they arethere, um they're not able to
get employees.
So so the question is, how isyour nonprofit being funded?
Who out of these stakeholders isactually saying, yes, we want
this and and you know, there isthe money to help you wage the
battle?
SPEAKER_00 (42:52):
Aaron Ross Powell Well, workers are saying they
want this and they're out therecollecting signatures.
So they may not have moneybecause they have or they're
paid$6.75.
So they don't have the fundsthat the National Restaurant
Association and the employersyou're speaking to have to
fight.
They have their time, you know,and even that is very difficult
because they're often workingtwo and three jobs.
(43:12):
So it's workers leading theeffort.
It's workers who actually,frankly, asked us to come to
Massachusetts and lead theeffort.
And there are donors who supportworkers who believe in economic
equality and racial equality andgender equality who support our
work.
SPEAKER_01 (43:26):
Aaron Powell Okay.
Um, so uh the one other, youknow, there is this ballot
initiative that you'responsoring has two elements to
it.
One element, of course, is toremove the tip credit.
The other element is that youwould employ, you would allow
employers to pool with the backof the house staff as well,
everyone who's earning an hourlywage.
So in on one hand, the increasein the removal of the tip credit
(43:52):
would increase their earnings.
On the other hand, the poolingof the tips would decrease their
earnings.
So how does that Help you toincrease the earnings of this
the tipped staff?
SPEAKER_00 (44:05):
It doesn't actually work like that.
And we've actually looked at soevery other c state in the
United States except for NewYork allows for tip sharing with
all non-management staff onceeverybody's paid a full minimum
wage with tips on top.
So we would never agree to tipsharing with back of house
unless and until workers arepaid a full minimum wage, as
(44:29):
they are with tips on top, asthey are in California, Oregon,
Washington, Nevada, Minnesota,Montana, and Alaska.
Now we've done what's calledquintile research.
We've looked at the fivequintiles of tipped earners in
California, from the top earnersat the Ritz-Carlton in San
Francisco to the bottom earnersat the IHOP in San in Br Fresno
or Bakersfield and compared thatto their comparators, quintiles
(44:53):
in Massachusetts.
And we see for every quintilefrom the top to the bottom, even
with tip sharing, even getting afull minimum wage with tips on
top and tip sharing, Californiaworkers are earning
significantly more.
The top tip earners inCalifornia are earning
significantly more than the toptip earners in Massachusetts.
(45:14):
Why is that?
Because the increase from 675 to1650, which is what we're paid
in California, is$10.
You don't share$10 worth of tipsper hour.
You share maybe a few dollars,if that, in tips with other
people.
So the overall increase that youget in both wages and tips,
(45:36):
because you continuously havesaid it's 20% across the board,
it doesn't change state tostate.
You've said that over and overagain.
And so if that's true, as wagesgo up, tips go up, and so
tipping is more in those states.
And so as tipping is more,there's more to share.
And with the wage increase andhigher tips, even with tip
(45:58):
sharing, workers in Californiaat every quintile are making
more.
SPEAKER_01 (46:03):
Well, the other way to look at it is say prices in
California are higher foreverything.
And so the percentage of tips.
Yeah.
So Saru, yeah, the vision thatyou provide of California is
that it's perhaps at odds withthe rest of the country thinks
of California where peopleleaving the state and businesses
are.
SPEAKER_00 (46:22):
I also agree with you that rent is higher.
Absolutely.
No questions asked.
I'm so sorry.
I was refuting the idea thatrestaurant menu prices are
higher.
So I would ask you to right nowgo online and look at the
Applebee's in Fresno orBakersfield where the wage is
1650, and look at the Applebee'shere in Boston where the wage is
675, you're going to see theexact same menu prices.
(46:44):
Now, I'm not saying that therecan't be some modest menu price
increases as wages go up.
I'm saying that over time, whatwe find is actually a
dissipating of significant menuprices because what happens?
I'm going to come back to theCFO of Denny's, who said that as
wages went up for them inCalifornia, Denny's workers were
(47:07):
able to eat at Denny's, guestreceipts were higher.
The company grew.
And so it isn't all about menuprice increases as wages go up.
You experience less turnover.
That's a savings.
You experience higher retentionrates, that's a savings.
You experience more guestreceipts, higher traffic.
So that's a, that is a that'srevenue.
(47:27):
So I don't think it's a, it'snot a it's please understand,
it's not a one-to-one thing.
It's not like one dollar of wageincrease results in one dollar
of menu price increase.
In fact, economists have seen ait's about 12%.
12% to go, that was when we werelooking at a federal bill to go
from$2.13 an hour to 15.
(47:48):
12% phased, 12% menu priceincrease over eight years.
That was the phase out of thebill at the federal level.
Eight years, your burger wouldgo from$10 to$12.
That is not these, you know,enormous menu price increases
that we're talking about.
That is very modest and franklyless than what we've experienced
(48:11):
in gas prices and food pricesincreases over the last couple
of years.
Aaron Powell Right.
SPEAKER_01 (48:17):
You know, so I I just want to uh talk about that
when you cited the example ofBakersfield versus
Massachusetts.
Um, you know, if you go to NewYork and you have this famous$1
slice of pizza, you don't findthat anywhere.
So it's the profit margin perand the volume of traffic that
is generated, which is alsopartly responsible for them
(48:39):
being able to sell at that lowprice versus other people.
Other places are not able tosell that pizza.
So um with the passage of this,I expect that people will see a
little bit higher prices uh whenthey go out to eat more.
To end it all, to wrap up thissegment, I have a quick round of
lighter questions for ourlisteners to get to know you
(49:01):
better.
So what's your favorite leisuretime activity other than eating
at restaurants?
SPEAKER_00 (49:07):
Uh reading or spending time with my children.
SPEAKER_01 (49:10):
What are who are your heroes who are making a
positive difference on anational or worldwide level on
any issue of critical importanceto society?
SPEAKER_00 (49:18):
Aaron Powell First, I have to say I'm a worker
organizer, workers.
Uh, over the last several years,we saw 1.2 million workers,
mostly young people, oftenwomen, demand more, walk off the
job and say, this isn't workingfor me, and demand more.
And that for a low-wage workerwho who is facing how do I pay
the bills, how do I pay therent, to say, you know what, I'm
(49:40):
worth more takes enormouscourage, enormous courage,
enormous, enormous strength andresilience.
And I, and so that's my numberone hero.
Um, I would love to nameincredible restaurant owners
that have been working with uson this over the years all over
(50:01):
the country, incrediblerestaurant owners, um,
Zingermans in Michigan,incredible restaurant owners
who've been supportive ofraising wages here in
Massachusetts, uh, Mamala's anduh Irene Lee from uh May May and
Bip Lau Rao from Comfort Kitchenand many others have been
leading voices on this issue,have been very supportive of
(50:22):
these issues.
So I think both workers andemployers in this industry are
who guide me in terms of thiswork.
There is clearly a better way ofdoing things that's better for
all.
SPEAKER_01 (50:33):
What is the favorite food that you enjoy most at
restaurants?
And do you feel safe eating atrestaurants?
SPEAKER_00 (50:40):
Um I feel safe eating at restaurants most of
the time.
I obviously wouldn't go toplaces that um, you know, where
people have done some very bullengaged in some very bullying
behavior towards me and workers.
So where I go, I feel safebecause I choose to go to places
that align with my values.
(51:00):
Um, that are I'm I'm vegan, so Ilike to go to places that have
vegan options and that alignwith my values.
SPEAKER_01 (51:07):
Thank you, Saru, for joining us once again.
It has been an engagingconversation on a very important
topic.
Thank you.
Thank you.
And thank you all for listeningtoday to our distinguished
podcast.
If you like what you're hearing,be sure to follow up and give us
a five-star rating.
If you want to join theconversation and share your
thoughts and suggestions, emailme at shaden at bu.edu.
(51:32):
That's shawdeen at bu.edu.
Special thanks to the team whoproduced this podcast, Mara
Littman, Andy Halleck, and theentire team at BU School of
Hospitality Administration.
To keep up with theDistinguished Podcast, be sure
to subscribe wherever you listento your favorite podcast.
You can also learn more aboutour undergraduate and graduate
(51:53):
programs at BU School ofHospitality by visiting pu.edu
slash hospitality.
Have a wonderful day and thankyou for listening.
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