Freezing the Wages of Those Tipped is Cold Act

Published in the Anchorage Daily News February 7, 2010

tip-jar-resizeHere we go again. CHARR has managed to rope in the Legislature on the latest pursuit of its longstanding dream of rifling through the pockets of tipped Alaska employees. This time, instead of trying to reduce wages directly, which was soundly rejected several years ago, CHARR has introduced House Bill 240 to freeze tipped employees’ wages if they make more than $15 per hour including tips. Let time and inflation take the blame for their gradual loss of wages. Clever.

The National Restaurant Association (NRA), which is sort of like a national CHARR, has had its way with most of the Lower 48 states, where it is legal to pay tipped employees as little as $2.01 per hour by imposing a tip credit. Fortunately, CHARR and the NRA have been repeatedly rebuffed by Alaska’s unions and even by the likes of Governor and former restaurant owner Tony Knowles, who, at the cost of his own bottom line, declared that servers’ tips ought to be inviolate since they ensue principally from the hard work of the servers.

Are tips wages? The IRS takes its share of any form of financial increase, including gifts. Its taxing of tips doesn’t mean they are wages. To the contrary, those tips are payments (or gifts) from the customer to the employee in a transaction that does not involve the business owner. Exactly how the nature of tips entitles business owners to use them in a flagrant shell game to enhance their own economic gain has never been explained. Nor is it clear why business owners are so concerned about how much their employees make in tips, which are paid by guests, not owners.

Proponents of the tip credit claim variously that (a) it is necessary in order to equalize wages from tipped to non-tipped employees (socialism); (b) because 44 states already have the tip credit (Everyone else is doing it.); (c) to keep menu prices down (It’s a Walmart kind of world!); to help restaurants survive (This suffering industry is projected to take in only $580 billion of revenue in 2010, according to the NRA. Compare that to the film industry’s $10.6 billion 2009 box-office revenues.).

CHARR president Dale Fox says lots of CHARR members have told him that Alaska employees earn up to $40 per hour in tips, some of them grossing over $50,000 per year. So, based on hearsay, let’s grab some of those tips. They’re turning into millionaires before our very eyes!

As one who has been a tipped employee for 20 years, I can tell you that only a small minority of us are earning more than $50,000 per year. I’ve had some great jobs, but never once a $50,000 year. As for the over-$50,000 crowd, perhaps we ought to do something about them. Everyone knows people who serve for a living are far too low-bred to be making that kind of money.

With an open-ended wage freeze in place, tipped Alaskans can join most of the Lower 48 in a state-sponsored impoverishment program for the enrichment of hospitality industry business owners. Tipped employees in most places are working for minimum wage and tips alone. They generally do not receive health care coverage, stock options, schooling reimbursement, travel benefits, pensions, or any of the other assorted benefits that are added (most of them tax-free) to the compensation packages of a large swath of the national work force. And their paid vacations are not exactly paid since the pay is based on their minuscule wage, which CHARR wants to let inflation further degrade.

What few people consider is that lowering tipped employees’ wages also diminishes employer contributions to their Social Security, Medicare, unemployment and disability insurance. This, the worst effect of the tip credit, has enormous lifelong consequences, shearing huge sums from tipped employees’ entitlement benefits.

Here is an industry that is saving untold millions on wages and entitlement contributions because they already pay most tipped employees around minimum wage. CHARR’s sob story just doesn’t ring true. Let’s express as much to our Legislature, particularly to the legislator who sponsored HB240, Rep. Craig Johnson.

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About Douglas Abbott

I am a freelance writer by trade, philosopher and comedian by accident of birth. I am an assiduous observer of humanity and endlessly fascinated with people, the common elements that make us human, what motivates people and the fingerprint of God in all of us. I enjoy exploring the universe in my search for meaning, beauty and friendship. My writing is an extension of all these things and something I did for fun long before I ever got paid. My hope is that the reader will find in this portfolio a pleasing and inspiring literary hodgepodge. Good reading!
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