E&W Blog

The tip credit is a tool used in the service industry to manage labor costs effectively and maximize take-home pay for tipped workers. Under this system, employers can count a portion of an employee’s tips towards the employer’s obligation to meet the federal minimum wage. This allows employers to give competitive wages to untipped backroom employees like dishwashers, while tipped workers remain well-paid. In fact, the median wage for full-service restaurant wait staff employees is around $27 per hour.

Chairman Kevin Kiley (R-CA) opened the hearing by exposing the shockwave that the tip credit rule has sent through the service industry. He stated, “There are over four million Americans working in tipped occupations, and they’re telling us very clearly: don’t take away the tip credit. In a recent survey, 90 percent of tipped employees said they prefer the current system.”

The witness panel featured experts including Mr. Tom Boucher, CEO-Owner of Great NH Restaurants, Inc; Mr. Paul DeCamp, Member of Epstein, Becker & Green, P.C.; and Ms. Simone Barron, Co-Founder of the Full-Service Workers Alliance.

Each witness gave powerful testimony, but none surpassed Ms. Barron, who spoke on behalf of many service industry employees as a 36-year tipped worker herself. Her scathing opening remarks drew on her experience with Seattle’s elimination of the tip credit, concluding:

I would dare any economist here to keep an eye on what’s happening in my city, my home. Watch the business closures. Look at how many jobs we have to have. Measure how the cost of living goes up every time that wage goes up. And you tell me how this is helping me and workers like me because I can’t.

The facts, the data, and verified testimony of workers with real industry experience all tell the same story. An overwhelming number of service workers support the current tipped credit system, and government-mandated wage hikes do not help workers, businesses, or customers. However, that didn’t stop Democrats from claiming they know best about how others should earn a living, which continued to be a theme throughout the day.

As the hearing moved to questioning, Rep Eric Burlison (R-MO) picked up where Ms. Barron left off. He stated, “I would think that would be very demeaning, belittling, to have someone to be telling you, ‘You just don’t know what you’re talking about…’”

“Absolutely,” Ms. Barron agreed, adding that it is “completely weird to me” when supporters of the Biden-Harris rule and those who oppose the tip credit, such as a fellow witness, claim to be the voice of restaurant industry workers without having ever worked a tipped job.

Nevertheless, Democrat critics incorrectly suggested that, among other things, the tip credit is a “subminimum wage.” Chairwoman Virginia Foxx (R-NC) contested that phrase in an exchange with Ms. Barron, asking, “Do you believe it’s a fair characterization of the wages earned by tipped workers?”