Category Archives: Political Animals

Minimum Wage Proposal Divides D.C. Workers, Voters

Washington, D.C. has a $12.50 per hour minimum wage, increasing to $13.25 on July 1. But for tip-earning workers, such as servers and bartenders, the minimum is $3.33 per hour ($3.89 as of July 1)—tips are supposed to make up the difference. And if they don’t, then employers make up the shortfall. Ballot initiative 77, due for a vote on Tuesday, would raise tipped workers’ minimum wage to match non-tipped workers’ minimum wage in steps through 2026. It would also index D.C.’s minimum wage to the Consumer Price Index so it would automatically annually increase after it reaches $15.00 in 2020. The proposal has divided the restaurant community.

Both sides have good points. Some restaurant owners favor a set wage because it gives them more stability in planning their costs. Some workers prefer that arrangement, too. They know, coming into work, roughly how much they’ll make on a given shift.

But some restaurant owners would rather pay the low wage, even if they sometimes have to randomly supplement it if business is slow or customers are stingy tippers. It lets them print lower prices on their menus, and there can be tax advantages in reporting lower wages. And some servers also prefer lower wages with higher tips because they walk out of work every night with cash in their pocket. They don’t have to wait two weeks for a paycheck. And if they go the extra mile for a good customer, tips can be very lucrative.

So who’s right? They all are. And that’s why ballot initiative 77 is a bad idea. It’s anti-choice.

Restaurateurs and their employees should be allowed to agree on any working arrangement they both see fit. Nothing is stopping restaurants from having a policy of paying its servers a higher wage and discouraging tipping. If that’s what some people prefer, they should be free to choose it, and are. And if some restaurants and workers prefer the low wage/high tip model, they should be free to pursue that, too. The choice should be made by people, not by legislation.

Customers are just as divided. Some prefer walking into a restaurant knowing that what’s printed on the menu is what they’ll pay. Others prefer being able to reward good service with a high tip, or repay bad service with a small tip. Everyone’s different. And they shouldn’t all be shoehorned into one model.

As for the other part of ballot initiative 77, indexing the minimum wage to inflation so it automatically goes up every year—voters should tread carefully. Some workers will benefit, but at a cost to others. Hour cuts, firings, workers never hired at all, non-wage benefit cuts, cuts to on-the-job perks like free parking and meals, and more are all unintended consequences that follow minimum wage hikes. Iain Murray and I have written about those tradeoffs here and here.

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An Honest Politician

From page 427 of Douglas Irwin’s Clashing Over Commerce: A History of U.S. Trade Policy:

When asked why he had supported President Hoover’s bid for a flexible tariff provision but now opposed Roosevelt’s similar request, Harold Knutson (R-MN) replied: “Frankly, I know the purpose of this legislation is to lower rates. If I thought for a minute that it was proposed to raise rates to meet the present conditions, I would vote for this legislation and be glad of the opportunity to do so.”

Both sides have good points in the strategic debate over achieving short-term results vs. the long-term sanctity of process and procedure. I personally lean towards preserving process, even when it leads to defeats on policy issues. Never give yourself powers you wouldn’t want the other side to have, and all that. Kudos to Knutson for being the rare man in Washington who made plain where he stood, even if it’s opposite me.

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