Seattle politicians are Landmark Minimum Wage Law of 2015At first, they probably didn’t expect it to transform the restaurant industry and shatter its traditional business model. But nearly a decade later, a provision allowing small businesses to pay tipped employees a lower base wage than non-tipped employees is set to expire, effectively raising the minimum wage by $3. And if the City Council doesn’t act by the end of the year, restaurateurs say the dining-out landscape will change out of economic necessity.
These owners predict that customers will start paying service fees, we’ll see more QR code ordering systems and tablets replacing human hosts, full-service restaurants may move to a counter-service model, and nearly all restaurants will raise prices.
Brandon Pettit is Delancey and Essex Ballad and Dino’s Congressman Pettit said a $3 minimum wage increase would be an existential threat to some businesses. He said he knows of one restaurant in Ballard that would see its labor costs increase by $85,000 next year if the minimum wage increases, putting it in the red. Currently, the restaurant does just $60,000 in sales.
“If this change pushes restaurants to zero profit, they’ll be forced to either charge a service fee, use iPads at the entrance to the building instead of hosts, or put robots in the kitchen,” Pettit said. “Effectively, the current model becomes unviable.”
Seattle restaurants face fiscal cliff
Washington state, unlike most other states, has the same minimum wage for all workers, whether they receive tips or not, but Seattle created an exception a decade ago, passing what was then known as the $15 minimum wage law, gradually raising its minimum wage from $9.47 an hour to $15 by 2021. To gain support from small businesses, lawmakers worked out a compromise that allows employers with fewer than 500 employees to pay a lower minimum wage as long as they make up the difference with tips or health benefits, but the exception expires in 2025.
In 2015, the minimum wage for most employers changed to $11, but in restaurants (nearly all of which qualify as small businesses with fewer than 500 employees), the minimum wage for tipped workers was $10. Both minimum wages were set to increase annually with inflation. At the time, the Seattle Mayor’s Office Estimation When the tip credit ends in 2025, the minimum wage for tipped workers will rise from $17.25 to $18.13, an increase of 88 cents.
These forecasters could not have predicted the COVID-19 pandemic and its ongoing economic impact, and the resulting inflation has far exceeded their original wage projections. Seattle’s current minimum wage is $19.97 for non-tipped workers and $17.25 for tipped workers. The city’s Department of Labor Standards has not released a minimum wage for 2025, but it is widely expected to be well above $20, which could increase restaurant wages by up to $3 or more.
“It’s not something the restaurants had anticipated,” Pettit said.
Supporters The Movement to Abolish the Tipped Minimum Wage in the United States They argue that these practices are rooted in racism and sexism, subject service workers to harassment, and encourage labor exploitation. But in Seattle, where the tipped minimum wage is the highest in the country, owners say tipped employees are often the highest-paid employees in restaurants. If the tipped minimum wage were to increase, servers would see immediate benefits, while cooks and other non-tipped occupations could see larger wage cuts.
“There’s always been tension between the back office and the front office,” he said. Rhino Room Capitol Hill and New Lucky Toy “When the wage jumped to $15 an hour, that’s when things really started to get worse for everyone. The wage gap really started to widen.”
Ethan Stowell, one of Seattle’s best-known restaurateurs, described the situation ten years ago this way: “We were basically paying our servers $10 and our cooks $20. The servers still made more, but the cooks were making more an hour.” As servers’ salaries increased due to a rise in the minimum wage, cooks also demanded more money. “If the servers are making $20 an hour, you have to pay the cooks $35,” Stowell says, summing up the classic restaurateur’s dilemma. “The math is very difficult to do unless your prices are astronomical.”
Are you a restaurant worker who would like to discuss how minimum wage changes affect you? email address
Upcoming Service Fees and Other Changes
Because Ethan Stowell Restaurants employs more than 500 people, it is not subject to the tipped minimum wage, and instead pays staff an hourly rate that includes a service charge. Pettit also said he has eliminated tipping at Delancey and is introducing a service charge, which is shared among all staff at the end of business each night.
Some owners prefer the service charge model because it helps reduce inequality between the front and back of house. However, it means that servers and bartenders earn less than they would under the tip model. Also, customers end up paying more than they would under the tip model because sales tax applies to service charges and automatic tips but not to tips.
Pettit predicts that full-service restaurants, where you sit down and a server hands you a menu, will be “almost forced” to switch to a service charge model if the minimum wage increases by $3 next year, because labor costs would otherwise eat up all of their profits.
But some owners are skeptical of the approach. For one, many customers have voiced their opposition to the service charge, and last year Reddit users across the country To avoid the service charge, Charlie Anse, owner of Ballard, began tracking restaurants that charged it. hello He is also president of the Seattle Restaurant Alliance, an industry advocacy group, and said he expects service charges to be lifted in the near future.Junk Fee“By Federal Trade Commission And banned It almost happened in California This year, they are considering other options, including raising prices or finding ways to cut staff hours.
“Why not put QR codes on the tables and have fewer servers,” Anse says, “and do more kiosk ordering? That’s why you see so many new places in Seattle that are focusing almost entirely on counter service, because that way they can minimize the amount of staff they need.”
Gabre Kidane also has no plans to change his bar’s model, but would be forced to make cuts if the minimum wage were to increase significantly. “We would have to increase prices, we would have to reduce staff hours and, if necessary, we would have to reduce opening hours,” he said.
Pettit said Delancey already has a service charge, so a minimum wage increase won’t affect him. His other restaurant, Dino’s, is counter-service and doesn’t rely as much on tips. He estimates that a minimum wage increase would raise labor costs there by $20,000 next year.
“You could raise your prices to cover that and still maintain the tip model,” he said, “but in the long term, as the minimum wage continues to rise, at some point the minimum wage plus tip model is going to become unviable because you just won’t be making enough profit.”
The end of the tip?
Pettit and Anse were among the restaurateurs who attended Seattle City Council’s July 30 meeting to warn council members about the impact the upcoming changes would have on their industry. This didn’t go over well. Those at the meeting, most of whom were labor activists and union members, supported eliminating the tipped minimum wage and criticized Councilwoman Joy Hollingsworth, whose district includes restaurant-dense Capitol Hill, for introducing a bill to make the two-tier system permanent. A few days later, Hollingsworth The bill was withdrawn And while he promised to meet with business leaders and unions, most of the rest of the council’s 2024 schedule is Immerse yourself in a discussion As for the city’s budget, it’s unclear whether city leaders will have time to pass legislation addressing the minimum wage.
Anse said he received negative Yelp reviews and hostile Instagram comments for attending the conference in the days that followed. Reddit post Accusing restaurateurs of “whining”[ing] “It’s impossible to pay them the actual minimum wage,” he said, urging people to boycott the restaurants and leave bad reviews. Several restaurateurs declined to publicly discuss the matter with Eater Seattle, fearing a public backlash.
“I think the restaurant industry has a bad PR problem with this,” Stowell says. “Any time the minimum wage goes up, some group of restaurateurs says, ‘This is going to be a disaster,’ so it sends the message that restaurant owners don’t want to pay their employees more, which isn’t the case. Restaurant owners want to make sure all their employees are treated equally, whether they’re front of house or back of house.”
While rising minimum wages may force some restaurant owners to end tipping, others, like Pettit and Hana Johannes, are actively eliminating tipping. Chicolina BakeryShe pays her two employees $25 an hour.
“As a business owner, it’s my job to make sure my employees are making a living wage and that they don’t have to worry about how the place is doing or how much tips they’re getting,” Johannes says. To do that, she’s had to raise prices and then lower them when sales dipped. She’s still trying to find a balance that works for her four-year-old shop, which moved to Capitol Hill earlier this year. “It’s a little hard to get customers in,” she admits. “I don’t know if it’s because of the prices or if it’s just because we’re new around here and that makes it harder, but it’s been tough.”
If tipping is eliminated at full-service restaurants, prices will almost certainly go up, owners say. “Consumers will see a significant increase in food prices come January,” said one restaurant owner, who asked not to be named because of the political wrangling surrounding the issue. “Dinner in Seattle will be more expensive than in New York or Tokyo.”
Pettit supports abolishing tipping, but is conscious of the impact it would have on not just restaurants, but servers and bartenders. “I’m all for abolishing tipping, but it would have a huge impact on the whole industry,” he said. “A lot of places would go out of business, a lot of front-of-house staff would have their pay cut, which is a problem, but a lot of back-of-house staff would get a pay raise, which is a good thing. So it’s a very complicated scenario.”
Stowell is a bit more optimistic. “The model is going to change,” he said. “It’s going to be a little bit volatile. That’s the way it is.”
