Eateries turn up noses at plan
When warm summer weather falls on the first Tuesday of the month, servers at The Beacon Hotel in Forward Township can earn $250 in tips by delivering steaming plates of shrimp, Louisiana crawfish and crab legs to Cajun loving customers.
“Fat Tuesdays are huge for us,” said Sarah Brennfleck, who has been a server at the restaurant for four years. “It's a good night when you know you're going to walk in here and make money.”
Employees and the owner fear that President Joe Biden's proposal to eliminate the tip wage and replace it with a $15 per hour minimum wage will take the fat out of Fat Tuesday by resulting in higher meal prices, fewer customers and less take-home pay.
“You don't become a server for the wage, you do it for the tips,” Brennfleck said.
In his proposed $1.9 trillion stimulus plan that Congress is beginning to debate, Biden wants to discontinue the tip credit that allows restaurants to pay servers and bartenders $2.13 per hour if that amount combined with tips equals the current federal minimum wage of $7.25 per hour, and raise the minimum wage for all workers including restaurant servers and bartenders to $15 per hour.
In a Jan. 14 address, Biden said the higher minimum wage would lift millions of people out of poverty.“If you work for less than $15 an hour and work 40 hours a week, you're living in poverty,” he said.In Pennsylvania, the mandated tip wage is $2.83 per hour. At The Beacon, owner Debra Krelow pays her servers $4.50 “and up” in tip wages.Meal prices will increase if the wages of all 12 servers and bartenders, and six cooks are raised to $15 per hour.“We have to. It's a definite,” said her son, Nick Krelow.Smaller portions, staff reductions, fewer customers, inventory tightening and utility monitoring are possible side effects.“If we have to charge $15 for a $10 pasta, they'll pick up a jar of Ragu,” Debra Krelow said. “Restaurants run on a razor thin profit as it is. I don't want to have to cook again, but I might have to.”According to a 2019 analysis by the Congressional Budget Office, raising the minimum wage to $15 per hour by 2025 would increase wages for 17 million workers and lift 1.3 million people out of poverty, but cost 1.3 million people their jobs.Lita Graef, who has been a server at The Beacon for a year to earn a second income to supplement her husband's full-time job pay, said she believes customers will be inclined to tip less generously if they pay more for meals. (The trickle down effect of higher meal prices will be less tips from customers.)“Food prices are going to have to go up. There's going to be days we'll make a third of what we make (now). You definitely don't come here for the paycheck. It's like a little tip,” she said.Tips on typical evenings have been down because the restaurant is operating at 25% capacity and closing at 11 p.m. due to COVID-19 gathering restrictions. Debra Krelow said she didn't want to go through the state's self certification process that would have allowed her to operate at 50% capacity because it required compliance with too many rules.Takeout orders have helped keep the business afloat during the pandemic, but the ripple effect of a $15 minimum wage will spread wide, she said.Nick said tips are incentives for servers to provide good service to customer and smaller tips could reduce the incentive.Debra said servers will have less incentive to upsell and that means selling less food.“It's going to hurt us all around. Prices will be raised probably substantially,” said Bonnie Rakarich, co-owner of Monroe Hotel in Butler. “The wait staff is definitely afraid of losing customers because of this.”
Rakarich, also an accountant, said the $2.83 per hour in base wages paid to her 15 tipped employees totaled $110,000 in pre-pandemic 2019. Working the same number of hours at $15 per hour would raise that amount by 228% to $225,000, she said.“We can't do that. That's just the tipped employees. We'll have to raise the dishwashers and cooks, too,” she said. “If I have to raise everybody, it's going to be devastating.”The Monroe has 33 nontipped employees such as dishwashers and cooks, she added.The wage taxes paid by the restaurant also will increase if all employee wages are increased to $15 per hour, Rakarich said.She is not concerned about a service curtailment.“We have a great wait staff. Our wait staff is not going to put wages before service. They are service oriented. We have a very low turnover in employees,” Rakarich said.Numerous efforts in states over the years to eliminate tip wages and raise the minimum wage have failed, said John Longstreet, president and CEO Pennsylvania Restaurant and Lodging Association.“The servers and bartenders have risen up and overturned it because it so dramatically impacted their livelihood,” Longstreet said. “The most devastating aspect of this proposal is the elimination of the tip wages that allows single mothers and others to work reasonable hours and make reasonable money without working full-time.”He said tipped restaurant employees make between $16 and $22 per hour mostly in cash in the existing tipped wage system.Higher meal prices will be included in the “sea change” that would occur with discontinuing tip wages, he said.“It's just not well considered. They haven't talked to the right people. They're hurting the very people elected officials think they are trying help,” Longstreet said. 'I haven't met anyone who supports it.”
