Michigan restaurants: Raising minimum wage would doom us. Others dubious
The Michigan Supreme Court is weighing a case that would raise the state minimum wage to $11.73 from $3.84 for tipped workers. Photo credit: Shuttershock.
by Janelle D. James (Bridge Michigan)
Allison Rybsky has been a server at Driftwood Bar and Grill in Novi for two years. In addition to waiting tables, she sweeps, mops and completes other cleaning tasks before clocking out.
She worries that increasing the state minimum wage to $11.73 from $3.84 for tipped workers may prompt layoffs, fewer tips, and more work, as owners shift more responsibilities to servers.
“Because a server is tipped so high and makes a high wage (employers) are going to expect a lot,” Rybsky said. “(Servers) are going to have to do everything, and it’s impossible when you’re waiting on tables.”
“As much as I would like to make more money an hour, I don’t think in the long run it’s going to work,” she said. “There are nights where I come in here for four or five hours, and I make $500.”
Rybsky is one of the 100,000-plus workers in Michigan’s restaurant industry anxiously awaiting a Michigan Supreme Court ruling expected soon on whether to increase the state’s minimum wage for hourly and tipped workers.
The change has been held up by the courts, after the Republican-controlled Legislature in 2018 adopted a ballot measure to boost the minimum wage to $12 an hour by 2022, then slowed the rate of increase for hourly workers and eliminated it for tipped ones.
The Supreme Court is weighing a Court of Appeals ruling in February that prevented the minimum wage from increasing to $13.03 for hourly workers from $10.10 an hour, along with new paid sick leave requirements.
The high court on Wednesday agreed to consider the case and whether the Legislature violated the state constitution by enacting and amending the citizen initiatives in the same session. Justices signaled they will hear oral arguments from both sides but have not yet set a date.
Opponents point to California, where the minimum wage is $15.50, claiming that tipped workers logged fewer hours and made less money. A 2017 paper from a U.S. Census Bureau economist concluded that raising the minimum wage for servers caused more to enter the workforce, lowering pay for tipped workers.
“I’m going to have to charge a ridiculous price for any single item,” said Roberto Ortega, owner of El Mariachi, a Mexican restaurant in Novi. “Their tips are going to decrease because I’m going to have to charge more to the guests. The guests are not going to have enough money to tip the same way they’re tipping right now,” he added.
Servers at El Mariachi work eight or more shifts per week and make $20 to $25 an hour with their tips, which can sometimes be more than what the managers make who are on salary.
Ortega said he worries that high menu prices will not only discourage tipping but will slow business down.
“A lot of small businesses are going to go out of business because there’s no way you can maintain it,” Ortega said. “I would shut down without hesitation.”
Research isn’t conclusive: The centrist Brookings Institution think tank argued that raising the minimum wage to $15 for service workers “boosts consumption (would) support the growth of local economies.”
Some economists have called the argument that tips would decrease if wages rose an “industry myth,” noting that tipping is far more modest in Europe. Others have argued that tipping has roots in racism, gaining popularity after the Civil War to justify lower wages for Black workers.
Seven states — Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington — require servers and bartenders to receive the full minimum wage in addition to tips.
In Washington, U.S. Rep. Rashida Tlaib, D-Detroit, has introduced the “Restaurant Workers Bill of Rights” that would bar employers from paying workers “anything less than the full minimum wage” and require universal health care, paid sick time and other benefits.
“No one should have to worry about paying rent at the end of the month or making ends meet because they can’t rely on consistent tips and lack paid sick leave,” Tlaib said in a statement.
One Fair Wage, which supported a Michigan coalition that collected more than 400,000 signatures for the 2018 ballot measure, points out that the majority of tipped workers are women, people of color or immigrants.
The group’s president, Saru Jayaraman, has said the “sub-minimum wage … has been a source of sexual harassment and racial inequity, for decades.”
Justin Winslow, president & CEO of the Michigan Restaurant & Lodging Association, said raising wages for businesses that are already struggling to come out of the pandemic would be disastrous.
His group estimates that 3,000 state restaurants closed due to COVID-19 shutdowns.
“Most restaurants are operating between 3 and 6% profit margins, so they would immediately have to make decisions on what they will do,” Winslow said. “They would find a way to work with fewer people in their restaurants because that’s the only way they can keep their doors open.”
Based on a survey conducted by the Michigan Restaurant & Lodging Association, 91% of respondents said they would increase prices and 58% said they would lay off employees if minimum wage increased.
“Without a doubt, the greatest impact is going to be on full-service restaurants,” Winslow said. “Restaurant servers are going to be the ones that take the hit the hardest.”
Winslow predicted that many restaurants would change their business model to eliminate the need for servers similar to restaurants like Panera Bread.
“It’s not a management versus labor issue,” Winslow said. “It is an issue where both sides are on the same side.”
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