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Friday, April 4, 2014

Saru Jayaraman on Lower Wages for Tipped Workers: "A Draconian, Sexist System"

Posted by on Fri, Apr 4, 2014 at 10:00 AM

At the city's minimum wage symposium last week, Saru Jayaraman, an author and activist who teaches at Berkeley and started the organization ROC United to serve workers in the restaurant industry, gave a rousing speech against tip credits. She spoke later in the day, when everyone was starting to fall asleep, but the room sure woke up to hear her. I was hoping the Seattle Channel would've caught all the panels on film, which they did, and so now (thank you Seattle Channel!) I can post Jayaraman's speech for y'all to check out:

A lot of the data she talks about is at ROC United's website, if you want to peruse further.

I also encourage you, if you have time, to watch the rest of that panel above—right after Jayaraman comes Eric Pravitz, co-owner of Hoa Salons, who says he agrees that tipping is problematic, but it's culturally built into certain industries. "We don't tell people to tip, we don't encourage them to tip," says Pravitz. "They tip, because that's just what we do in this country... It's a cultural thing, and this is what makes it difficult to come up with a policy that addresses all of these issues in an equitable way." Pravitz's story is fascinating; he and his wife opened their salon business after recognizing that the cheap nail salon industry was treating its workers—mostly immigrant women—horribly, and the goal of their business is to create a nail salon model that pays people a decent wage and is safe and healthy, in an industry where that's not often the case. He's really open about what he pays his workers and what they make in tips. It's a fascinating discussion.

(The video also includes—bonus!—city council member Bruce Harrell's jokes and Alex Zimmerman heckling from the audience.)


Comments (26) RSS

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I guess I'm slow, but if the employee is earning at least $15 an hour, why it matters if it comes from a hourly wage or a tip?
Posted by drshort on April 4, 2014 at 10:06 AM · Report this
seatackled 2

Because then the employer is having the customer pay part of the wage directly.
Posted by seatackled on April 4, 2014 at 10:18 AM · Report this
Theodore Gorath 3
@1: Why does an restaurant owner get to claim my money as part of their payroll?
Posted by Theodore Gorath on April 4, 2014 at 10:27 AM · Report this
Will in Seattle 4
What @3 said - if I want to give money to the owner - and sometimes I do - I give it to them, not the wait staff

The tip is for the staff not the owner - period
Posted by Will in Seattle on April 4, 2014 at 10:36 AM · Report this
MacCrocodile 5
@2 - And since the customer is by no means required to tip, it defeats the purpose of a minimum wage.
Posted by MacCrocodile on April 4, 2014 at 10:37 AM · Report this
chinaski 6
Shit like this makes me want to see $15now implemented just so tipped employees can post photos of what people are writing on the tip line.
Posted by chinaski on April 4, 2014 at 10:52 AM · Report this
@3 & @4

The IRS considers tips as wages, and the employer is required to pay FICA on those. It's not as simple as "it's the worker's money." And that worker wouldn't be getting a tip but for their work in the owners establishment.

However you spin it, it's cash compensation for labor provided.

And in the video, the speaker put our statistics from employee and employer reported sources noting that tips aren't that high. Gee, wonder if there's a possibility that those two groups might want to underreport tips?

Posted by drshort on April 4, 2014 at 11:02 AM · Report this
Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn 8

The IRS does not consider tips wages. They consider tips to be income. Like gifts, or lottery winnings, or scholarships, capital gains, etc.

If you really believe the myth that the IRS considers tips to be wages, can you find one single IRS regulation that says, "tips are wage"? No? Where does this belief come from? The IRS never told you tips are wages.

All you see is numerous IRS regulations saying the phrase, "wages, tips and other compensation". The IRS says you got some income that is wages, you got some other income that is tips, and you got many other kinds of income too. All the IRS cares about is that you pay your taxes on all of it.

The reason employers start to think tips are their money is that the IRS does make restaurants help to force workers to claim their tops. Somehow (I believe it's a kind of plantation mentality) restaurant owners get it in their heads that if they're regulating their worker's money, then it becomes the owner's money.

It's not, any more than scholarships or lottery winnings, or other income. Tipped workers are not slaves and the fruits of their labor are not all the property of the owner.
Posted by Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn on April 4, 2014 at 11:23 AM · Report this
"Tipped workers are not slaves and the fruits of their labor are not all the property of the owner."

I don't think anyone is arguing that they are the "property of the owner." But if the purpose of increasing the minimum wage is to ensure that workers have enough income to live on, and not simply to stick it to business owners, why should it matter where the worker's income comes from?
Posted by Marooner on April 4, 2014 at 11:40 AM · Report this
@8 except tips are part of the job, not independent like lottery winnings, they are income they gain from their job.

simple solution, 15 buck min wage for all and we end the social stigma with not tipping, restaurants could even ban tipping or ask their customers not to tip since their workers earn a "living" wage.
Posted by j2patter on April 4, 2014 at 11:48 AM · Report this
You must include all tips, including tips not
reported to your employer, as wages on your
income tax return. You may use the last page of
this publication to total your tips for the year.

Your employer must withhold income, social
security, and Medicare (or railroad retirement)
taxes on tips you report. Your employer usually
deducts the withholding due on tips from your
regular wages
Posted by ChefJoe on April 4, 2014 at 12:34 PM · Report this
Max Solomon 12
@10: hahaha. not when tipped restaurant staff can make >$50/hour when tips are factored in.

take for example Millers Guild, featured on Slog yesterday. a salad there is $26. with tax, that's $29 salad. since tipping is now 20% on the post-tax total or you're a lowlife cheapskate, that's a $6 tip. on a salad. the min wage is $9.32 in Seattle, so add the $6 tip to that and you're over $15/hour. by serving 1 salad.

I think tip credit might be ok for SOME workers. just not those where tipping is optional. it's not optional at a restaurant.
Posted by Max Solomon on April 4, 2014 at 1:19 PM · Report this
Around 59:00, she claims that people view tips as something additional on top of the wages that employers are paying and not as wages themselves. I disagree with this. I almost always tip 20% because I feel like the wait/cooking staff are getting screwed if I don't, not because I think they deserve an extra special bonus on top of what most people in non-tipping jobs are able to make. I would much prefer a system where the service charge is just included in the price and I don't have to think about tipping. This is how it works in many other countries (such as Japan) and I think it is much nicer.
Posted by Zzzzzzz on April 4, 2014 at 1:23 PM · Report this
Nevermind, listened a little farther and she kinda just made my point.
Posted by Zzzzzzz on April 4, 2014 at 1:25 PM · Report this
Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn 15

"Tips are part of the job" is your opinion about why they should be counted against the minimum wage. You didn't get that from the IRS.

And employers don't deduct their employees' tips as an expense on their returns. Tips don't come out of the employer's budget. They're not the boss's money. If we eliminated tipping, it wouldn't save the employer any money because tips don't cost the employer any money.

Entertainment venues that don't have tipping, like movie theaters, would have a big competitive disadvantage over restaurants if we gave restaurants this wage tip penalty. The movies would have to pay everybody $15/hr, but the restaurant gets away with paying less -- at no cost to themselves.

Just to recap: The IRS has noting to do with tip penalties. You're on your own inventing justification for paying tipped workers less.

As far as "solutions", solutions to what? The 15Now initiative is going to pass. Panic is setting in. The Times' editorials are getting even more shrill. Yet they have no new arguments. They're just renaming their old arguments: instead of saying $15 is "too much" now they call it an "outlier" which is another way of saying "too much".

In a few weeks, these aghast, pearl-clutching op-eds will devolve into nothing but an unintelligible screech, and then a low, sad moan.
Posted by Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn on April 4, 2014 at 1:48 PM · Report this
Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn 16

That's like saying an employer can cut their wages if an employee gets a gift from relatives. Or wins a lottery prize.

And it gives employers in industries with tips an unfair competitive advantage over alternative entertainment, like movies or dining in. Grocery stores have to pay the full minimum wage, and so will have to raise their prices more than a restaurant that gets away with sub-minimum wage and makes up the difference with other people's money.

Other. People's. Money.

It doesn't come out of payroll. Tips or no tips, the employer's balance sheet is the same.
Posted by Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn on April 4, 2014 at 1:55 PM · Report this
@16 "That's like saying an employer can cut their wages if an employee gets a gift from relatives. Or wins a lottery prize."

It's not remotely the same. Tips are income generated directly from your labor as an employee of the business. Those items you listed aren't connected at all to your labor or employment.

" Tips don't come out of the employer's budget. "

They certainly come out of the total revenue generated by the establishment. And I'm pretty sure that somewhere there's some itemized sheet that says x15% of gross receipts were distributed as tips. And those tips require the employer to pay extra taxes and the employee to list them as income.

Not including a tip credit goes far beyond the stated goal of 15 Now.

Posted by drshort on April 4, 2014 at 3:44 PM · Report this
"Not including a tip credit goes far beyond the stated goal of 15 Now."

That's not true at all. 15 Now vigorously opposes a tip penalty. Perhaps you missed The Stranger headline "Total Compensation Is a Deceptive System That Would Effectively Gut a $15 Minimum Wage", written by an organizer of 15 Now.
Posted by Tip penalty on April 4, 2014 at 5:27 PM · Report this
@16 please explain what the difference between me paying the restaurant 20 bucks, the server 5 bucks, the restaurant paying the server 10 bucks vs the restaurant paying the server 15 bucks, me paying the server nothing and me paying the restaurant 20 bucks. In both case the server makes 15 bucks for doing the job they are hired to do.

Tips aren't wages? Fine then no more 20% guilt trip from service workers. If tips aren't to offset their wages then they become only for doing a good job and I don't see why we should tip the barista and not the movie theater concession clerk.
Posted by j2patter on April 4, 2014 at 5:47 PM · Report this
@16 all business pay their employees with others peoples money, what do you think revenue is. Its Other. Peoples. Money.
Posted by j2patter on April 4, 2014 at 5:50 PM · Report this
Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn 21

If tips were the employer's money, then they wouldn't need to ask for a tip credit. The would be free to take "their" money and apply it to the $15/hr. wages.

That's what employers did, or threatened, with paid sick leave: they took away employee meals, or vacations, or other perks. Things given by the employer, the employer may take away. Tips, not theirs to take away.


If somebody is making you feel guilty about something, that's between you and them. Leave me out of it. It's between you and your server or bartender. If you think that relationship isn't working for you, then sever it. That's my advice.


Aaaaaand now here we are in crazy town. When a customer makes payment for their bill, the money stops being the customer's and becomes the establishment's. We call that a "transaction". It's a transaction between two parties: the customer and the business. An employee may handle the money, but it's never theirs. If they took it, that would be theft.

A tip is a transaction between the customer and the worker. The employer is not a party to that transaction.

As I said, if were the employer's money, they'd have the right to decide how it's spent. They'd have the right to spend it elsewhere, such as to apply it to the pay increase up to $15.

The whole reason employers have to ask for a tip penalty in this instance is that they don't have any other way to get their hands on employees' tips. Instead of asking for a tip penalty, they'd simply announce, "Fine, we'll take tips to make up the difference."

But they can't because that would be theft. Employers have been charged with theft for stealing a worker's tips many times. They've been convicted of theft for that. e.g. ...

Because. It's. Not. Their. Money.
Posted by Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn on April 4, 2014 at 6:10 PM · Report this
@21 Employer have been charged for not paying their employees min wage. Just because its not part of the employers profit doesn't mean its not part of the income the employee earns from their job. if it wasn't for their job they wouldn't earn this income. Yes its a transaction between the employee and the customer, but its a transaction for the job the employee does. Its dependent on the job, not independent as the other silly examples you us.

Posted by j2patter on April 4, 2014 at 6:21 PM · Report this
@21 what are your tipping habits? Do you always tip, even for just ok food/service? What do you tip baristas and bartenders?
Posted by j2patter on April 4, 2014 at 6:27 PM · Report this
Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn 24

I'm sorry, the money is the employee's. That's a legal fact. Anybody else touches it, we call the cops on them.

Saying they wouldn't make this money if it wasn't for the job could go both ways. Why can't the employee say to the owner, "You wouldn't make any money if I didn't work here. Therefore I can just help myself to what I like..." No way, Jose.

Both the employer and the employee profit from their relationship. They both make money the could not have made without the other. That doesn't entitle either party to take what isn't theirs.


I tip the usual amount as everybody else. Here's the thing: I don't lose any sleep over it. I don't begrudge anybody their tips. Clearly there's a lot of tightwads and autism spectrum types out there who grind their teeth and fret over tips all day long. That's sad. Tipping is not rocket science. It's a simple thing, everybody does it, and there's no need to cry about.

You do realize you can pack up and move to places where tipped workers only get $2.15? Most of America. Washington is unusual in having no tip penalty. I think maybe you'd be happier there, instead of feeling all this angst at waiters making more money than you can tolerate. Who knows? Maybe they'd grovel more and you'd enjoy that.
Posted by Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn on April 4, 2014 at 7:01 PM · Report this
Were you not removed from the stranger a while ago..aka Goldie
If so just understand that speaks for itself.

I dont frankly care to much about this issue but find the obvious conclusion having been a server and bartender for many years is that they would prefer to keep things status quo.
Tipping nets you alot more then 5.68 per hour will as an offset. BTW Servers work like 7 hours a day Lunch 11:30-2:00 5:30:-9:30 and make alot of money in short burst or periods of time.. the rest of time its typically slow-going .

The whole sexist thing seems alittle strange to me. It exists but how exactly is paying $15 vs tipping going to change that.
Posted by A real live employer on April 7, 2014 at 7:05 PM · Report this
Also Theodore Gorath..
I think it safe to say your not that intelligent. Re-read your post and I think you will get the irony of paying your bill for a meal is direct compensation to the owner whether you care about the tip or not.
Posted by A real live employer on April 7, 2014 at 7:08 PM · Report this

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