One Fair Wage or tip penalty? Debate splits St. Paul service industry

The minimum wage debate in St. Paul has only begun, and already tipped workers are at the forefront.

Two public events this month exposed a divide within the restaurant industry over whether employers should be allowed to pay less than minimum wage, as long as workers make up the difference in tip income.

Proponents call it a “tip credit.” Opponents call it a “tip penalty.”

Whatever it’s called, Minnesota is one of just seven states without one, and that won’t change as Minneapolis’ citywide minimum wage edges closer to $15 over the next six years.

But it’s not for the restaurant industry’s lack of trying. Employers lobbied fiercely for a tip penalty last year in Minneapolis. At the Capitol, they backed Republican lawmakers’ bill to block cities from passing minimum-wage ordinances.

So it’s unlikely the restaurant industry will sit on the sidelines as St. Paul’s newly elected mayor, Melvin Carter, looks to deliver on his campaign pledge to make $15 a reality in the capital city.

A push for ‘one fair wage’

Unions and worker advocacy groups like the Restaurant Opportunities Center United, which is organizing tipped workers in St. Paul, oppose a two-tier wage system. They argue it leaves behind the very workers a minimum-wage increase is supposed to benefit.

“If your business is on the verge of closing because your workers demand to be paid an equitable wage, then you need to think twice about your business model,” said Steven Lewer, a server who lives and works in St. Paul and a supporter of maintaining one fair wage in his industry.

Government data shows job growth in the restaurant industry is outpacing any other area of the economy, but average earnings in the industry – $22,350 per year for full-service waitstaff in Minnesota – are stuck at the poverty level.

That’s why lawmakers in New York, Michigan and elsewhere are moving to roll back tip penalties, ROC United President Saru Jayaraman told tipped workers gathered at the St. Paul Labor Center Jan. 17.

“You as a state have been a shining example for the rest of us,” Jayaraman said. “Why would we consider going backward in St. Paul when the rest of the country is going forward?”

ROC United’s Saru Jayaraman talked with tipped workers supporting one fair wage in St. Paul.

An imbalance of power

Jayaraman presented evidence that restaurant workers in states with a tip penalty experience sexual harassment at nearly double the rate of their counterparts in states like Minnesota. The connection between tipping and harassment isn’t hard to understand, St. Paul server Sarah Kopp-Reddy said.

“When tipped workers rely too heavily on tips, it becomes a lot easier for power dynamics to be thrown off,” Kopp-Reddy said. “When power dynamics are off, servers put up with a lot more. The customer can truly never be wrong.”

Restaurant workers in the U.S. already experience sexual harassment more frequently than workers in any other industry, according to a Buzzfeed analysis of complaints filed with the federal Equal Employment Opportunity Commission. A ROC United survey found 90 percent of women working in the restaurant industry have experienced sexual harassment.

Many employers in the industry, Lewer said, take advantage of workers’ reliance on tips to create a “toxic work environment.”

“Employers will say you’re not smiling enough, or you need to be able to take this harassment you’re getting at the table,” Lewer said. “You’re going to view those things as OK because you need the job, you need the tips. That’s not the way a working environment should exist.”

A split among servers

Lewer and Kopp-Reddy, both 28, see growing support among tipped workers in St. Paul for an ordinance establishing one fair wage, but they acknowledged support is far from universal.

Proponents of the tip penalty staged a public event Jan. 8 at a Cathedral Hill bar, where restaurant owners and staff made the case for paying tipped workers less. Several servers and bartenders expressed concern that their employers would not be able to absorb a higher minimum wage, or that patrons would no longer leave tips.

One shift manager from a bar on West 7th Street spoke on behalf of his wife, a server who, when it comes to higher wages, “doesn’t need it, doesn’t want it.” A bartender from Minneapolis said he’s looking for work in St. Paul now that his hourly wage is on track to increase annually. The owner of a Como Park eatery warned that iPads could replace waitstaff if their wages go up.

Doomsday predictions and scare tactics are a permanent fixture of the minimum wage debate, Jayaraman said, but they aren’t backed up by empirical evidence.

Look no further than Minnesota’s own restaurant industry. The state’s minimum wage has increased by 33 percent since 2014, when state lawmakers passed the first increase in decades. Despite dire warnings from industry lobbyists during the legislative process, employment in restaurants and bars has grown by over 16,000  since 2014, according to data compiled by the state’s Department of Employment and Economic Development. On average, people working in restaurants are earning $57 more per week.

“Tipping isn’t going to go away” as the minimum wage goes up, Jayaraman said. “But no amount of evidence seems to overcome fear.

“What we’re trying to do is offer hope, to let people know that there’s a beautiful future on the horizon in which we, as tipped workers, are treated as the professionals we truly are.”


  1. […] of Minneapolis’ new minimum-wage ordinance, and lift up the campaign for a $15 minimum wage – without a tip penalty – in St. […]

  2. […] The labor movement has a long history of backing legislation that improves working people’s lives, from the eight-hour day to child labor laws. Today, unions carry on the work of raising standards for all workers, whether they hold a union card or not. That’s why unions in St. Paul are leading the campaign for one fair minimum wage in our city, with no penalty for tipped workers. […]

  3. […] Citizens League report reflects a split within the restaurant industry over the tip penalty, which allows employers to pay a sub-minimum wage as long as workers make up the difference in […]

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