The hospitality industry is filled with incredible servers, who, for the most part, intentionally chose this business because of the perks of tipping. In an already challenging time for the industry, the Michigan Legislature is proposing changing the structure of their pay, which will leave them with less than half of what they bring home in tips. It certainly wouldn’t be a good thing for the food industry or for Michigan’s economy.
The current law, Improved Workforce Opportunity Wage Act (PA 337 of 2018), and its amendment should remain and not be overturned as we have seen the current structure work efficiently.
As the owner of Grand Rapids-based restaurant Brann’s Steakhouse, I worry about my staff struggling to make ends meet if the state removes the tip credit for workers. And I’m not alone, my staff feels the same way.
Melissa Pupils and Noelle Dyer have each been working at Brann’s for over ten years, and this is the first time they fear not being able to take care of themselves and their families.
“It’s a terrible idea,” said Melissa when asked about the potential law. “This law would actually be a huge wage decrease, and none of us can afford a 50% pay cut.”
On a Wednesday night, Melissa takes home anywhere between $150 and $200 in tips working a six hour shift, which equals $25 to $35 per hour. But if the new minimum wage law goes into effect, the experience in other places shows that while the minimum wage and prices rise, tips plummet. Melissa’s pay would drop to $12 to 20 per hour, a huge cut in her income.
“One of the main reasons we joined this industry was for the great income we generate from tips. If you replace tipped wages with the minimum wage, customers will think we’re doing just fine and we don’t need to be tipped as much,” she explained. “People don’t realize we make double the proposed minimum wage in tips alone.”
The wage increase proposed in state legislation would be so devastating to the current business model. Why change the structure of servers’ pay when average data from the Michigan Restaurant and Lodging Association, MRLA, currently shows take home pay is at $24/hour? Double of what this legislation would create. Who can take a 50% pay cut right now?
Because her wage is based on tips, Melissa says she gets to decide what her income is, and that’s why she loves her job so much.
“I’m basically a sub-contractor and self-employed. I can give myself an immediate raise on any given day based on the quality of my service,” she says, “and that’s saved me on occasions when I’ve needed to cough up cash quickly to repair my car or pay for medical expenses.”
Melissa says people don’t think about the wide demographic of workers in the industry, including working mothers and students who rely on flexible jobs that offer this type of quick cash incentive where they can take home their pay that day as supplemental income. With the new legislation, most of their pay would instead come in the form of a check every other week. One of the keys to success in the restaurant industry is great customer service, which is incentivized by tips. If you replace tipped wages with a minimum wage, you drastically cut server income and eliminate their motivation to work. That makes it more difficult to hire servers in an industry already experiencing an intense labor shortage.
When hiring and retaining talent, this legislation will make it more difficult to hire servers, exasperating an issue this nation is already facing. And we’re going to hurt the people who are already in the industry and their overall income. Word spreads fast and new people are going to hear this is one industry not to join.
Noelle feels the potential new law is insulting to industry workers. “If you’re good at your job, you make way more than $12 an hour as a server. If we start getting paid a flat rate, our customer service will go down because we won’t have an incentive to go above and beyond to make customers happy,” which she explains will ruin the experience for customers.
This legislation will add insult to injury to my staff as we have barely recovered from the challenging pandemic closure orders inconsistencies and now are dealing with supply chain issues and rising food costs. If a wage increase is enacted, those costs will also have to be passed on to the menu prices by 20-25%. We’ll see fewer customers because prices will be so high to make up for the wage increase, resulting in less opportunities for servers to make good tips.
With this forced change to our business model, instead of employing 12-15 servers on a Saturday, we would have about seven and will have to further rely on technology to get customers what they need. We enjoy employing people and love seeing them make money.
The new legislation is deceiving, especially considering an existing law in Michigan that requires restaurants to pay servers a wage difference if they don’t make equivalent to the minimum wage after adding up their tips. I grew up in the food industry. My family has been in this industry for over 95 years. That’s multiple restaurants in various cities, and thousands of employees, and not once have I or any of my family members had to pay the difference because a server didn’t make equivalent to the minimum wage in a shift. Let that sink in.
We can easily look to other states who have implemented the same legislative change and see how unhappy it left restaurant workers. In fact, when servers in Minnesota heard that Michigan was considering implementing a minimum wage law, they came to our state and helped organize protests against it. They were chanting, “please stop helping us,” and that was all the proof we needed.
It’s simple, really. If it’s not broken, don’t fix it. We urge the court to stop this devastating mandate that will hurt Michigan workers.
By Johnny Brann, Owner, Brann’s Steakhouse and West Michigan Policy Forum Board member.