Minimum Wage Increase Ahead for Restaurants

Minimum wage laws are at a tipping point. Those in favor of a higher minimum wage argue their necessity based on the cost of living. Opponents, on the other hand, fear the potential impact of higher labor costs on businesses.

For restaurants, the squeeze is tighter on than most other businesses.

Roughly half the minimum-wage workforce is employed at businesses with fewer than 100 employees, and 40% are very small businesses with fewer than 50 employees, according to the Census Bureau.

Heading into 2017, 21 states committed to putting minimum wage increases into effect. Currently, the minimum wage has increased in 20 states or cities. Minimum wage is increasing across the country, but some front of house restaurant staff are concerned misinformation, or a lack of understanding of how these increases work, has resulted in negative impact on the tips they depend on, according to a survey we conducted.

The minimum wage is going up….

A little over 36% of our respondents said the minimum wage has risen in their state of employment in the last 6-months.

Restaurant Minimum Wage Increase

*Only 2 of the respondents working in a state with a minimum wage increase selected that they do not receive tips in their position.

…But take home pay is not.

Of those respondents, 73% said that their take home pay – restaurant wages and tips – has not increased since wage went up.

While salary for a waiter or waitress might be up, tipping is down. 24% say their tips have decreased as a result of an increase in minimum wage.

Minimum Wage Increase Tip Increase In Restaurants

It appears, according to our survey, that restaurant staff believes guests’ perceptions of what an increase in minimum wage means. (Ironic, since when one restaurateur attempted to eliminate tipping, she was called “Un-American”).

45% believe that guests’ think the waiter or waitress salary has gone up, and staff makes more money as a result of the minimum wage increases. 

Minimum Wage Guest Perception

The reality is that in most cases, tipped workers are not impacted by a blanket minimum wage increase.

In states like Vermont and Maine, for example, tipped workers make $5 an hour, despite minimum wage increases to $10 and $9 an hour respectively. Worse, in Massachusetts, where the minimum wage rose to $11/hour, tipped employees still only make $3/hour.

Minimum Wage Increase Map North East Upserve

The change in laws puts restaurant owners in a tough spot, however. Many restaurants might look at surcharges, or raising the hourly wage while dropping tips. But in our survey, tipped workers said they wouldn’t accept a substantial increase in hourly pay if it meant eliminating tips.

Minimum Wage Increase Server Perception

Over 68% of restaurant staff said they would not take an increase in hourly wage if tipping were removed. This isn’t surprising, as a past Upserve study indicated that 97% of servers preferred tipping as their payment method.

For restaurants, one thing is clear: margins might be tight, and the minimum wage will impact your bottom line, but perhaps not in the ways you thought.
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In a perfect world, Theresa would spend her days reading good books and writing all the time... and she'd own all the shoes her heart desired. When she's not on the hunt for shoes, you can find this Rhode Island transplant on the hunt for food that comes close to "Long Island". Her favorite? Caffe Dolce Vita in Providence's historic Federal Hill.