It’s déjà vu all over again.
Having just addressed the minimum wage issue in the New Mexico Legislature, the fight is back at the federal level. The so-called Raise the Wage Act would create a $15 minimum wage and eliminate the “tip credit,” whereby tipped employees earn at least the minimum wage through a base wage plus tip income.
None of New Mexico’s U.S. Representatives should vote for this bill.
The debate in New Mexico earlier this year is instructive. The final bill, which passed with overwhelming support from Democrats, kept the tip credit and incrementally raised the minimum wage to $12 per hour by 2023. The final compromise exists in part because tipped employees raised their voices and let our legislators know that the tipping system works for tipped employees, customers and restaurant operators alike.
Contrary to how this tip credit is presented by its critics, there is no “lower minimum wage” for tipped employees, and there never has been. Tipped employees must take home at least the minimum wage through the combination of the direct hourly pay from their employer and the tips they earn. If the combination of the hourly wage and tips does not equal or exceed the minimum wage, the restaurant must pay the tipped employee the difference. There are serious penalties for restaurants that fail to follow the legal requirements that guarantee tipped employees at least the minimum wage.
While the existing law guarantees that tipped employees make at least the minimum wage, most earn more. The friendly, efficient, and hard-working servers at my restaurant, Tomasita’s in Albuquerque, which is a mid-priced restaurant, earn between $18 and $30 per hour each shift. Where the tip credit does not exist, these well-compensated tipped jobs can disappear. Moderately priced restaurants switch to a counter-service model. Visit California, Oregon and Washington to see this first hand.
In the restaurant industry in New Mexico, I’ve known countless workers who started at the bottom and are proud to have worked their way up to high-paying positions. Upending this beneficial system hurts people on my staff like Brenda, a bartender and single mother in Santa Fe who started out as a host several years ago and now earns over $180 every Friday night. The job gives her the flexibility to take of her kids, including one with a health issue requiring regular trips to Albuquerque for treatment.
It hurts Sam who is finishing his Ph.D. in history and wants to be a teacher, and earns enough waiting tables to work his way through college. And it hurts servers like Maria who has an eighth-grade education from Mexico, came to this country as a young woman, learned English, and now takes great pride in giving great personal service to her regular customers.
I understand the desire to raise the minimum wage; the $12 standard will cause some hardship for New Mexico’s small businesses, but it’s a more-responsible approach than the alternative. I would point out that a $15 minimum wage makes no sense for New Mexico, and arguably makes no sense anywhere. The reason for this is basic economics. When restaurant or any business costs increase, they have to raise prices to stay profitable. At the end of the day, higher minimum wages are paid by the customer. The law of supply and demand is real – when the cost of something goes up, people buy less of it. Less customers means less employees.
In New York City, where the wage rose to $15 per hour in late 2018 and the tipped wage doubled in magnitude, restaurant employment growth stopped in its tracks; the full-service restaurant industry lost 6,000 jobs last year. What will happen to the businesses in Española, Lordsburg and T or C especially when the next recession hits?
Too many politicians have moved to the extreme left on economic policy. While usually well intended, these policies make it harder for small employers to stay in business and hurt workers and customers in the long run. This year in the New Mexico Legislature, Democrats understood this and came to a compromise that works. New Mexico’s representatives in Washington, D.C., should do the same.
George Gundrey is the owner of Tomasita’s Albuquerque and Tomasita’s and the Atrisco Café in Santa Fe. He is a third-generation New Mexico restaurateur.