National Restaurant Association Opposes H.R. 582, “Raise the Wage Act”

Washington, D.C. — Today, the National Restaurant Association sent a letter to U.S. House Education and Labor Committee Chairman Bobby Scott and Ranking Member Virginia Foxx opposing the H.R. 582, the “Raise the Wage Act.”  The restaurant industry is the nation’s second-largest private sector employer, and if passed, H.R. 582 would stifle new job creation, impose undue harm to our nation’s small business owners, and harm those it proclaims to help. 

H.R. 582 would increase the federal minimum wage from the current $7.25 per hour to $15 per hour over five years, index the minimum wage to inflation thereafter, and eliminate the tip credit.  “Mandating a $15 per hour starting wage across the country fails to recognize the simple economic reality that not all communities are the same. What might be right for California or New York would have stifling impacts to restaurants and other small businesses in areas where workers do not face the cost of living they do in major cities,”  said Shannon Meade, National Restaurant Association, Vice President of Public Policy and Legal Advocacy.

Raising the federal minimum wage is harmful to both business and employees. Restaurant profit margins are razor thin, usually between three and six percent.  A dramatic rise in labor costs could force restaurant owners and operators to raise menu prices, cut back on current employees’ hours, and/or eliminate positions.

Eliminating the tip credit is the second component of the proposed legislation that harms employees. “The tip credit allows tipped-employees to earn far more than the minimum wage, while helping to reduce labor costs for restaurants and others that operate on thin profit margins,” said Meade. Tipping creates major earning potential for tipped employees and fuels the high-quality guest service that is a hallmark of the restaurant industry.

 “We encourage the Committee to consider a common-sense, balanced approach in this debate over the federal minimum wage and take into consideration the different economic realities across the country. Additionally, we also encourage the Committee to seriously consider and address the negative impacts tipped employees would suffer if the tip credit is eliminated,” concluded Meade.

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Background

According to a recent survey of 529 full-service restaurant operators with tipped employees, the median hourly earnings of entry-level servers is $19 per hour, while the median hourly earnings of more experienced servers is $25 per hour.  Furthermore, the data revealed that the upper quartile of those surveyed are earning $38 per hour.  Employees benefit from tips and support the current system.  Recent attempts to eliminate the tip credit Maine, Michigan, and the District of Columbia, all failed as employees launched massive grassroots campaigns to preserve the current system.