Minneapolis scene

Most everyone here in Minneapolis acknowledges minimum wage should and will go up. But that, especially when it applies to restaurants, is where the common ground ends.

The issue for many working in the restaurant industry is in how it gets implemented. And the divide is nowhere more evident than in the tale of two service industry professionals.

“Most tipped workers are women and low wage jobs are disproportionately filled by women and people of color…seven of the 10 highest poverty wage jobs are in the restaurant industry.” -Jentzen

Ginger Jentzen, a former server who became the executive director of 15 Now Minnesota, an organization advocating for raising Minnesota’s minimum wage to $15 per hour, believes the wage should increase regardless of whether the position receives tips or not. “Most tipped workers are women and low wage jobs are disproportionately filled by women and people of color,” Jentzen said. “Seven of the 10 highest poverty wage jobs are in the restaurant industry.”

On the other side is Sarah Norton, a career server and founder of Service Industry Staff for Change, a loose coalition of service industry professionals weighing in on issues that affect local restaurant and foodservice businesses. She wants an increased minimum wage, too, but with an exception for tipped workers. “Employers depend on the tipped model, that’s the system that’s been set up,” she says. “You can’t just come in 40 years later and change that. We are 100 percent opposed to eliminating tipping, hands off our tips.”

Getting to this point has not been easy.

The debate in Minneapolis has simmered with moment of flash. Several groups attempted to put on the ballot an amendment to raise the minimum wage from its current rate $9.50 to $15 per hour. The city fought the proposal and, in August of 2016, the Minnesota Supreme Court sided with the city, deciding that the city charter does not grant citizens the right to vote on policy decisions.

“Employers depend on the tipped model, that’s the system that’s been set up,” she says. “You can’t just come in 40 years later and change that. We are 100 percent opposed to eliminating tipping, hands off our tips.”- Norton

It was back to the negotiating table and, in several cases, on the city streets in the form of protests.

“Why not just let the city of Minneapolis decide on this policy instead of keeping workers in poverty?” Jentzen asked. “We are still doing a lot of grassroots campaigning and putting pressure on the city. They are researching and making a decision by June.”

The city’s mayor, Betsy Hodges initially didn’t back a city-wide minimum wage hike, saying she preferred a regional approach to the issue. But facing a challenging 2017 mayoral race, Hodges pivoted and said she now supports raising the municipal minimum wage and opposes any exception for tipped employees.

Minneapolis scene
Photo Courtesy of Lynne MK Morioka

This sparked concern for many restaurateurs and the group Norton co-administers, which wants to raise the minimum wage to $15 for non-tipped employees, increasing hourly pay for back of house staff, but freeze the current wage for tipped employees and add lower youth wage for people ages 18 and under. “I’m a server who has taken on City Hall, pretty much,” Norton says. “There is a void in Minneapolis between the service industry staff, who normally just want to stay out of politics, and with City Hall as to what is happening to our jobs.”

“Why not just let the city of Minneapolis decide on this policy instead of keeping workers in poverty?” -Jentzen

This is where the community divides: how to handle tips.

The opposing sides can’t even agree on terminology – the parties advocating a $15 minimum wage across the board say figuring tips into the equation is a “tip penalty.” The service industry professionals and restaurateurs supporting a minimum wage floor that figures in tip amounts refer to it as a “tip credit.”

Currently, Minnesota’s minimum wage is $9.50 per hour for employers generating more than $500,000 in sales per year, and $7.75 for employers generating less than that amount. But Minnesota state law explicitly states that tips received by an employee can’t be counted against the employer’s minimum wage obligation, also known as a tip credit.

Tip credits are a seemingly wonky topic that provoke controversy. Minimum wage laws are a hot debate across the country, but often determined on a state or even regional level. More than 20 states or municipalities raised their minimum wage in 2017. And some states that have hiked the minimum wage, such as Maine, are now considering instituting a tip credit after backlash from restaurants and servers.

Minneapolis scene
Photo Courtesy of Lynne MK Morioka

In Minneapolis, Mayor Hodges supports a minimum wage increase without including a tip credit, citing U.S. labor statistics. “The stereotype that in Minneapolis, tipped workers all work in high-end bars and fine-dining restaurants and thus make far more than $15 an hour is also false,” Hodges said in a February. “On the contrary, a federal Bureau of Labor Statistics study that covered the years 2012-15 showed that in our metro area, the average wage for restaurant servers came to not much more than $10 an hour, including tips. Only 10 percent of restaurant servers in our region averaged $15 or more an hour with tips.”

But Lina Goh, co-owner of independent restaurant Zen Box Izakaya and chair of the steering committee for the group Pathway to $15, says that formulation is overly simplistic. “One size does not fit all,” she says. “Yes, we agree with the city and the general purpose of raising the standard of living for the people of Minneapolis. If the $15 goes into effect, it will directly affect everyone’s livelihood.”

“Yes, we agree with the city and the general purpose of raising the standard of living for the people of Minneapolis. If the $15 goes into effect, it will directly affect everyone’s livelihood.” -Goh, Zen Box Izakaya

The Pathway to $15 proposal calls for a gradual increase in the minimum wage to $15 per hour, but incorporating a tip credit into that calculation to meet the minimum wage. For non-tipped employees, the wage would be the agreed-upon $15 per hour. For tipped employees, the wage would remain at Minnesota’s current $9.50 minimum. Under this system, tips will be counted as wages to meet the $15 required minimum wage. If tips for an employee’s shift fall short of that $15 minimum, employers will make up the difference for a guaranteed $15 per hour.

Minneapolis scene
Photo Courtesy of Lynne MK Morioka

Without that compromise, Goh says some businesses will close. And those that remain open will need to change their business models. Cooks will always be needed in the back of house, she says, but worries technology will take place of service staff in many cases.

Examples of this can be found in national chains like Wendy’s and Panera Bread, which have added or plan to add self-service ordering kiosks that enable customers to place orders without the assistance of a worker behind the counter. The option has been so popular at participating Panera locations that the company said they have increased the number of kitchen employees to handle the increase in orders.

Those in favor or raising the minimum wage look at examples like Seattle and San Francisco, which are both passed raises to the hourly rate at a target of $15 per hour. But opponents of a blanket wage note Minneapolis is a smaller city with a lower median wage than San Francisco or Seattle.

Another complicating factor – Minneapolis and St. Paul make up the Twin Cities. But only Minneapolis would be raising the wage.

“Seventy-five percent of people working in Minneapolis live outside of Minneapolis,” Goh said questioning that the proposed wage increase would help many of the city’s residents. “This is also going to make Minneapolis an island. Minneapolis restaurants will have to raise prices for the same dish that across the street (in the neighboring city) will be less expensive.”

“Without our tips, we don’t have jobs. People seem to think we’re hiding tips, we’re not claiming tips, we’re sitting on a pile of cash. But we have to report 100 percent of our tips. Everyone pays by credit card now, the computer systems claim it for us. When people paid by cash and check 20 years ago, that (unclaimed tips) used to happen. Now there’s a digital trail to everything. The government is still getting our tax money.” -Norton

The Minneapolis-based restaurants vocal about the issue publicly worry that they will have to do away with tipping in favor of a standard service fee as well as raise prices to cover the increase in costs, which has proven to be unpopular with staff and guests in places that have tried to institute a non-tipping model.

Minneapolis scene
Photo Courtesy of Lynne MK Morioka

“That’s the model that drops us to $15 an hour. Without our tips, we don’t have jobs,” Norton said. “People seem to think we’re hiding tips, we’re not claiming tips, we’re sitting on a pile of cash. But we have to report 100 percent of our tips. Everyone pays by credit card now, the computer systems claim it for us. When people paid by cash and check 20 years ago, that (unclaimed tips) used to happen. Now there’s a digital trail to everything. The government is still getting our tax money.”

Jentzen, though, dismisses those concerns as talking points for big business interest groups. “It’s the big business groups that fight it the hardest – trade groups protecting the profits of the biggest restaurant chains and businesses,” she said. “They try to perpetuate doomsday scenarios that they’re not going to be able to survive.”

She said 15 Now Minnesota agrees the minimum wage should be increased statewide, indeed, federally. “But when a city leads, it can have a positive impact on the surrounding economy.”

“Tips cannot be considered a reliable source of income,” Jentzen said. “It varies so much depending on shifts, what the restaurant’s business model is, where there’s enough business coming in. You can’t build a sustainable business model that rests on driving profit from continuing to pay workers low wages.”

“We’re all on the same team, there’s a misconception that pits us against our employers as some adversarial relationship and that’s not true. Most of these places are small businesses operated by people who used to be servers and cooks, but the concept is that we’re always at war.”-Norton

The divide is showing no signs of healing.

Norton said she is unhappy with the way the 15 Now Minnesota campaign is attempting to separate the opinions of restaurant owners and service staff. “We’re all on the same team,” she said. “There’s a misconception that pits us against our employers as some adversarial relationship and that’s not true. Most of these places are small businesses operated by people who used to be servers and cooks, but the concept is that we’re always at war.”

All the service industry professionals and restaurants are seeking, she insists, is a compromise.

But in her February statement, Hodges seems to dismiss the idea of a compromise outright stating it would: “Create a sub-minimum wage for tipped workers” and, “be a logistical nightmare for Minneapolis businesses as it would add new layers of cost, complexity and liability to doing business and would be extremely difficult to comply with.”

Minneapolis scene
Photo Courtesy of Lynne MK Morioka

Goh and the restaurants supporting the Pathway to 15 insist their solution is easy to administer as restaurants and bars already know and report on tips for each pay period, tipped employees know what they’ve earned in tips and employers know and report the number of hours worked by each employee (information reported for unemployment insurance). The group says the numbers are easily calculated using popular automated payroll services or only require a few simple steps if calculating manually.

Two proposals, very distinct opinions and an apparent unwillingness to compromise – where to from here?

This fight isn’t over. And Jentzen and Norton are continuing to push their approach as the debate heats up. Jentzen actually stepped down as executive director of 15 Now Minnesota to run for City Council in Minneapolis. Hodges is running for reelection against at least four other candidates for Minneapolis mayor in an already contentious campaign for an election taking place in November 2017. The 15 Now Minnesota campaign continues to move forward with their platform of a $15 minimum wage for all, calling for any tips earned to be on top of that figure.

“Create a sub-minimum wage for tipped workers (would) “be a logistical nightmare for Minneapolis businesses as it would add new layers of cost, complexity, and liability to doing business and would be extremely difficult to comply with.” -Mayor Betsy Hodges

Meanwhile, Norton and Service Industry Staff for Change are holding a series of in-person listening sessions designed to organize and mobilize servers and bartenders in Minneapolis opposed to “abolishing tipping in the service industry.”

As debates around minimum wage and tipping are held across the country, the sides being taken in Minneapolis are likely to become a test case for restaurants everywhere. The future of minimum wage here is clearly $15 per hour. When it comes to bars and restaurants, it’s just a question of how they will get there.

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Lynne owns Social Visibility Consulting where she is a writer, content strategist and social media specialist working with businesses and consumer brands. She has a degree in journalism and more than 15 years of experience creating and sharing stories. Lynne is on an endless quest for restaurants around the world with unique takes on simple food.