What is the Raise Wage Act?

The Raise the Wage Act imposes an impossible challenge for the restaurant industry. While other businesses on Main Street are starting to see a recovery, hotels, and restaurants across the state are struggling to stay open amidst restrictions and limits that have been in place for ten months. The industry has laid off nearly 50% of its workers as a result of the pandemic and is estimated that 1 in 6 restaurants have shuttered.

Our industry runs on a 3-5% pre-tax profit margin in a good year – during a pandemic is not the time to impose a triple-digit increase in labor costs. Far too many restaurants will respond by laying off even more workers or closing their doors for good. As the pandemic has highlighted, the economic realities of each state are very different. A nationwide increase in the minimum wage will create insurmountable costs for many operators in states where restaurant jobs are most needed for recovery.

The elimination of the tip credit will cut the take-home wages of thousands of tipped employees who make far above the proposed minimum hourly wage. These skilled hospitality professionals generally earn between $19-25 dollars per hour and have made clear many times before that they support a tipped minimum wage.

The hospitality industry needs time to recover, but at the same time, we stand with the National Restaurant Association, the American Hotel and Lodging Association, and our members as we are ready to have a conversation about a balanced way to address wage levels in the hospitality industry. We hope that Congress and the Administration will appreciate the unique impact any change would have on the economic recovery of both our workers and restaurant operators.

How much will the federal minimum wage increase to if this legislation passes?

The Raise the Wage Act would increase the federal minimum wage to $15 by 2025 and eliminate the tipped wage by 2027.

How will implementing the Raise the Wage Act negatively impact restaurant operators?

Percentages of restaurant operators who say implementing the Raise the Wage Act will negatively impact their ability to recover from the pandemic:

• 82% of all restaurants
• 79% of limited-service restaurants
• 85% of full-service restaurants
• 82% of independent restaurants
• 90% of franchisee restaurants

Restaurant operators say implementing the Raise the Wage Act would lead them to increase menu prices and add equipment/technology that reduces employees.

Restaurant operators say implementing the Raise the Wage Act would push them to cut employee hours, benefits and hiring.

Why does tipping work?

Tipping is essential for individuals in the restaurant industry. Servers are incentivized to provide excellent customer service to patrons. Tipped employees typically earn on average between $19-25 per hour of additional take home pay.

The tip credit system incentivizes servers to deliver excellent service, enables customers to reward servers for great service, and allows restaurants to keep labor costs in check.