First off, no one makes jiust $2.35/hour. By law your employer must pay tipped employees the minimum wage if the tipped wage does not equal the minimum wage for the area. This article is useless until we learn how much the author makes including tips and how much of those tips they declare as income versus how much they keep hidden. We need to understand her real income, not just her per hour rate.
My point isn't that the author is secretly making big money, but I've known many diner servers who routinely make over $25/ hour in tips for a breakfast shift. ($150/6 hours) That is high volume, quick service and small check average. Its a tough job. Kind of like WaffleHouse. How much of that they declare, I do not know but my guess is less than half. It doesn't matter, though. If that diner suddenly eliminated tipping and paid them $15/hour while raising the prices of waffles, etc by enough to cover the added expense, I doubt they would be happy. They would almost certainly lose money. What would happen to the diner when the prices go up 20% or more is an open question. If it was done in isolation, the answer would be clear... customers would find another diner. If it was universal then would those customers still come three days a week? Or would they only come twice? Would they still get "the Works" omelet? Or would they opt for just cheese? What would you do? Would you still tip 20% on your check, meaning the cost of your breakfast would maybe be 50% more than before?
Actions have consequences. If you increase the price of a good, whether that good is a waffle or an hour of labor, buyers will naturally purchase less of that good, all else being equal. Caveat emptor.
It is complete and utter assfuckery that in America it is legal to pay someone $2 an hour and then expect them to rely on tips to make up the difference. Seriously, I know it is some kind of American tradition, but to people around the rest of the world this comes across as hideously regressive. If servers can earn $25ph - on or off the record - with tips, then bully for them, but it is no excuse for restauranteurs to underpay their staff. And if that means breakfasts double in price then oh fucking well. I get mad about a lot of politics, but this kind of wack double standard for pink collar workers is next level infuriating. I can hardly even believe that people think it is fair, because it seriously is not fucking fair.
MTE. I think food should be priced at what it costs to serve and turn a profit, which includes paying the staff a live wage. If that means raising prices, so be it. I'd rather pay double than have my server forced to subsidize my meal with their incredibly low wage.
If tips were treated as they are elsewhere in the world, I think that would be absolutely true. But it is an expected norm that the customer pays the server directly in the US, via the tip. Not indirectly, via the employer as in other countries. Fixating on just the amount paid by the employer (Who also subsidises the employees taxes, workers comp and social security payments, btw.) ignores what a server's real income is. I don't understand why that doesn't matter and is so hard to understand. It isn't like the employer is charging for waffles as if they were paying servers $15/hr and then pocketing the difference. How is it unfair that a server can come to work at 7 AM, work a hard shift for 6 hours and walk out the door with $150 cash in their pocket? Every two weeks the $2.35 paid by the employer goes to pay the taxes owed on whatever they've claimed, probably much less than $150. What makes that so wrong? Under the proposed changes they would do the same work, walk out with $0 and have to wait until payday for $90, minus the various taxes and withholdings. I would love to know how much the OP really earns. She doesn't earn $2.35. She probably earns significantly more than $7.25. By obscuring this truth, she is distorting the argument and being dishonest.
OK, let's double the price of breakfast. What happens next? People can no longer afford to eat out for breakfast. Waffle House goes out of business. The server's income drops to zero. How is that better, again?
Look, this argument matters because if restaurant owners have to raise prices to cover increased labor costs, eating out at a restaurant will become much more of a luxury, and by extension, much rarer. That means not just servers, but cooks, dishwasher, managers will either lose their jobs or have their hours curtailed. That is reality. Business will fail, and people will lose their jobs. Own it.
It's going to be a hard sell to tell others that an average of ~19k a year is too much money for someone to earn. Also, if you really think businesses will unilaterally be flattened by raising the minimum wage, something not backed up by our evidence on this so far, then they were being subsidized by those low-wage workers in the first place, and I don't think that's right.
I'm agreeing with you, but just supplementing what you're saying.
The argument that you and I are making is a holistic one: the minimum wage issue isn't about this one Waffle House employee. People are simply not making enough money to LIVE right now. The WSJ had a report last year that 74% of welfare recipients either had a job or were part of a family where someone worked. Literally 3 out of 4 people receiving gov't assistance (ya know, our TAX dollars) are people who are working or directly with someone who does. That's a massive social problem.
What policraticus also ignores is that more money to workers stimulates the economy. The more money they make, the more they have to spend on goods and services. Maybe a restaurant does lose significant business by a price increase from disgruntled customers, but maybe they also get increased business from people who suddenly are making enough money to eat out every now and then.
This stuff isn't exact (it's really all theory) - but right now people are hurting, and it's costing taxpayers a lot of money to keep them afloat. It needs some form of correction.
I don't think the original poster was disputing anything you're saying. The central point (I believe) is that the actual physical employer is only paying about 40% of what is "minimum wage". I'm sure as a server, the poster (and pretty much anyone else that waits tables) makes that and thensome, even at a place like Waffle House.
Much like with wages themselves, it really does depend on the local market. I live in Seattle, and there's a neighborhood diner/bar I frequent. After the 15$ minimum wage law passed, they made a 20% tip mandatory on all checks (with the option to leave an additional tip on top of that) to cover for it. I can say, without hesitation, they have not lost any business at all. It's still as busy as it ever was and I don't go any less because of that. I was tipping over 20% every time anyway. I can't say something similar would happen in the Appalachian area where OP lives, but there's a decent chance that folks would pay more. Places increase prices all the time and don't see a downturn in business enough to not offset the price differences.
The much larger risk is if the cost of employing real labor goes that far up, more investment in automation happens, and then jobs get eliminated in large numbers because it's cheaper to just buy and maintain machines rather than pay a workforce. Although that's not isolated to food service - that's anywhere and everywhere.
Making the 20% tip mandatory is a good way to avoid the problem of raising prices, but understand this, that might mean the restaurant will be capturing 20% but then paying out much less than 20% to the servers.
Like I said above, by earning 20% on average a server might make $25/hour cash. FWIW, at my restaurant that number is closer to $35/hour. What stops an employer from capturing that 20% charge (in my case $35/hour) and paying out $15 or $20/hour while pocketing the rest? Why wouldn't I have every incentive to pay new servers the minimum ($15)but pay experienced servers more, but still less than the full 20%? Since the current transparency afforded by direct tip will be gone, how will servers be able to know? Frankly, if the servers are content with $20 and hour, I'd be a fool to pay them the extra $15. That money could go to pay the cooks more, improve my equipment, or buy myself a nice trip to Paris. Also, not for nothing, the income of servers will then be 100% taxable. Which means that 30% or so of their wages will now go to Uncle Sam. Remind me again how this is supposed to be helping the service industry workers?
Pretending that there is no price sensitivity for a 20% or more increase on the cost of a good is just silly. If that was true, why can't I just charge whatever I want right now? Believe me, I'd love to. Yes, businesses raise prices all the time, but only according to the demand for a good and the cost of a good. If I thought I could raise my prices 20% and suffer no loss in business I would already have done it. I don't keep my prices as low as I can to screw my staff. I do it because why would a person eat my $18 hamburger when they can eat my competitors equally delicious $15 hamburger?
Your point about automation is 100% valid. If I could automate, I would in a heartbeat. If someone brought me a product that could cut my labor cost by 20% I'd be a fool not to take advantage of it.
Right. I'm not assuming the full 20% tip goes to the servers (it's not even listed as "gratuity" on the bill, it's "local living wage adjustment" or something of that ilk). Effectively, they're charging the extra 20% just to get to the $15/hour. I don't know the specifics of the dispersal of profits at this place (nor do I care to ask) but judging solely on the lack of turnover in the wait staff there, I'd say they're probably not getting screwed.
Again, it's more local than anything, and isolating it just to food service is a little tunneled. Anyone who works within a 10 mile radius of a city like Seattle or San Francisco literally cannot survive on (I'd say) less than a $12/hour paycheck between the cost of housing, food, goods, basic utilities, local taxes, etc. It doesn't work the same in, say, Kansas or Arkansas. For what it's worth, I'm not in favor of a federal minimum wage increase, but I think it's crucial to have it set pretty high in some markets where it's needed, and the local labor force is being exploited.
I'm not "pretending there is no price sensitivity". I have a masters degree in economics and have at least a rudimentary understanding of this sort of thing. I'm simply saying it's incorrect to go full-tilt the other way and say if IHOP increased the price of pancakes by $0.50 they'd go tits-up in a week. Remember the gnashing of teeth over Papa John's jacking up their prices for pizza and blaming it on Obamacare? Their stock price on NASDAQ has gone from $18 to $87 in four years. Doesn't look like a whole bunch of folks decided to switch to Domino's in protest. Personally, I think you're giving far too much credit to price sensitivity. Would people balk at a $18 hamburger if they could get one for $15? A few might. I don't think most folks would. Prices get raised all the time for a variety of reasons. It's not an automatic causation scenario that businesses, small or large, tank instantly when this happens.
Minimum wage in Seattle went up to $15/hour; rest of the state it's st $10, though we did just vote to raise it to $15.
I moved here (here being the Olympia/Lacey area) from WV, and the cost of living is maybe a little higher, but basically the same. And that's *with* us paying an extra $500 ish a month in rent. Because, surprise, surprise, when the minimum wage goes up, workers can actually purchase things beyond sheer survival. And the costs on the employer's end don't go up enough to be really noticeable, especially to people that normally couldn't afford things like buying clothing that's never been worn before.
My point isn't that the author is secretly making big money, but I've known many diner servers who routinely make over $25/ hour in tips for a breakfast shift. ($150/6 hours) That is high volume, quick service and small check average. Its a tough job. Kind of like WaffleHouse. How much of that they declare, I do not know but my guess is less than half. It doesn't matter, though. If that diner suddenly eliminated tipping and paid them $15/hour while raising the prices of waffles, etc by enough to cover the added expense, I doubt they would be happy. They would almost certainly lose money. What would happen to the diner when the prices go up 20% or more is an open question. If it was done in isolation, the answer would be clear... customers would find another diner. If it was universal then would those customers still come three days a week? Or would they only come twice? Would they still get "the Works" omelet? Or would they opt for just cheese? What would you do? Would you still tip 20% on your check, meaning the cost of your breakfast would maybe be 50% more than before?
Actions have consequences. If you increase the price of a good, whether that good is a waffle or an hour of labor, buyers will naturally purchase less of that good, all else being equal. Caveat emptor.
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OK, let's double the price of breakfast. What happens next? People can no longer afford to eat out for breakfast. Waffle House goes out of business. The server's income drops to zero. How is that better, again?
Look, this argument matters because if restaurant owners have to raise prices to cover increased labor costs, eating out at a restaurant will become much more of a luxury, and by extension, much rarer. That means not just servers, but cooks, dishwasher, managers will either lose their jobs or have their hours curtailed. That is reality. Business will fail, and people will lose their jobs. Own it.
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http://www.theatlantic.com/business/archive/2015/02/how-much-do-waiters-really-earn-in-tips/385515/
Also, even raising the minimum wage would increase prices to consumers by an average of 4.3% (https://journalistsresource.org/studies/economics/inequality/the-effects-of-raising-the-minimum-wage). I imagine those price increases would be higher than average in the service industry, but more than 10x the average seems like a stretch.
It's going to be a hard sell to tell others that an average of ~19k a year is too much money for someone to earn. Also, if you really think businesses will unilaterally be flattened by raising the minimum wage, something not backed up by our evidence on this so far, then they were being subsidized by those low-wage workers in the first place, and I don't think that's right.
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The argument that you and I are making is a holistic one: the minimum wage issue isn't about this one Waffle House employee. People are simply not making enough money to LIVE right now. The WSJ had a report last year that 74% of welfare recipients either had a job or were part of a family where someone worked. Literally 3 out of 4 people receiving gov't assistance (ya know, our TAX dollars) are people who are working or directly with someone who does. That's a massive social problem.
What policraticus also ignores is that more money to workers stimulates the economy. The more money they make, the more they have to spend on goods and services. Maybe a restaurant does lose significant business by a price increase from disgruntled customers, but maybe they also get increased business from people who suddenly are making enough money to eat out every now and then.
This stuff isn't exact (it's really all theory) - but right now people are hurting, and it's costing taxpayers a lot of money to keep them afloat. It needs some form of correction.
Reply
Much like with wages themselves, it really does depend on the local market. I live in Seattle, and there's a neighborhood diner/bar I frequent. After the 15$ minimum wage law passed, they made a 20% tip mandatory on all checks (with the option to leave an additional tip on top of that) to cover for it. I can say, without hesitation, they have not lost any business at all. It's still as busy as it ever was and I don't go any less because of that. I was tipping over 20% every time anyway. I can't say something similar would happen in the Appalachian area where OP lives, but there's a decent chance that folks would pay more. Places increase prices all the time and don't see a downturn in business enough to not offset the price differences.
The much larger risk is if the cost of employing real labor goes that far up, more investment in automation happens, and then jobs get eliminated in large numbers because it's cheaper to just buy and maintain machines rather than pay a workforce. Although that's not isolated to food service - that's anywhere and everywhere.
Reply
Like I said above, by earning 20% on average a server might make $25/hour cash. FWIW, at my restaurant that number is closer to $35/hour. What stops an employer from capturing that 20% charge (in my case $35/hour) and paying out $15 or $20/hour while pocketing the rest? Why wouldn't I have every incentive to pay new servers the minimum ($15)but pay experienced servers more, but still less than the full 20%? Since the current transparency afforded by direct tip will be gone, how will servers be able to know? Frankly, if the servers are content with $20 and hour, I'd be a fool to pay them the extra $15. That money could go to pay the cooks more, improve my equipment, or buy myself a nice trip to Paris. Also, not for nothing, the income of servers will then be 100% taxable. Which means that 30% or so of their wages will now go to Uncle Sam. Remind me again how this is supposed to be helping the service industry workers?
Pretending that there is no price sensitivity for a 20% or more increase on the cost of a good is just silly. If that was true, why can't I just charge whatever I want right now? Believe me, I'd love to. Yes, businesses raise prices all the time, but only according to the demand for a good and the cost of a good. If I thought I could raise my prices 20% and suffer no loss in business I would already have done it. I don't keep my prices as low as I can to screw my staff. I do it because why would a person eat my $18 hamburger when they can eat my competitors equally delicious $15 hamburger?
Your point about automation is 100% valid. If I could automate, I would in a heartbeat. If someone brought me a product that could cut my labor cost by 20% I'd be a fool not to take advantage of it.
Reply
Again, it's more local than anything, and isolating it just to food service is a little tunneled. Anyone who works within a 10 mile radius of a city like Seattle or San Francisco literally cannot survive on (I'd say) less than a $12/hour paycheck between the cost of housing, food, goods, basic utilities, local taxes, etc. It doesn't work the same in, say, Kansas or Arkansas. For what it's worth, I'm not in favor of a federal minimum wage increase, but I think it's crucial to have it set pretty high in some markets where it's needed, and the local labor force is being exploited.
I'm not "pretending there is no price sensitivity". I have a masters degree in economics and have at least a rudimentary understanding of this sort of thing. I'm simply saying it's incorrect to go full-tilt the other way and say if IHOP increased the price of pancakes by $0.50 they'd go tits-up in a week. Remember the gnashing of teeth over Papa John's jacking up their prices for pizza and blaming it on Obamacare? Their stock price on NASDAQ has gone from $18 to $87 in four years. Doesn't look like a whole bunch of folks decided to switch to Domino's in protest. Personally, I think you're giving far too much credit to price sensitivity. Would people balk at a $18 hamburger if they could get one for $15? A few might. I don't think most folks would. Prices get raised all the time for a variety of reasons. It's not an automatic causation scenario that businesses, small or large, tank instantly when this happens.
Reply
I moved here (here being the Olympia/Lacey area) from WV, and the cost of living is maybe a little higher, but basically the same. And that's *with* us paying an extra $500 ish a month in rent. Because, surprise, surprise, when the minimum wage goes up, workers can actually purchase things beyond sheer survival. And the costs on the employer's end don't go up enough to be really noticeable, especially to people that normally couldn't afford things like buying clothing that's never been worn before.
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$2.35/hour X 30 hours = $70.50, plus employer contribution to taxes etc, $100 (roughly)
$15/hour X 30 hours = $450, plus emploer contribution to taxes, etc., $520 (roughly)
I assure you, an employer will notice a quadrupling of his labor cost for a server.
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