How President-elect Biden’s push to end tip wage and raise minimum wage could hurt bars and restaurants

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CARMEL, Ind. — President-elect Joe Biden has yet to take office, but his economic plans have discussed the push for a $15 minimum wage that would include an end to tip wages. Hospitality industry leaders in the state say the change could be detrimental to bars, restaurants, and employees.

“A lot of servers, even at family dining restaurants, make more than $15 an hour, so this could be a reduction in their hourly wages as well. We will see where this goes. Some states have been forced with this, but often times that tip credit wage is not touched, not changed,” explained Patrick Tamm, president and CEO of the Indiana Restaurant and Lodging Association (InRLA). “At the same time, we are also very encouraged by some things he has in this economic recovery package.”

Tip wage in the state is $2.13 an hour, but local servers say tips tend to push their hourly rates well beyond the suggested new minimum wage. Tamm says restaurants would have to adjust, and may even be forced to do away with the tip model all together, or resort to counter service similar to a Chipotle. Going toward a wage model could mean major lost revenue for successful servers and bartenders.

“I can go through the state and tell you where servers are making $80,000 to $100,000 a year,” explained Tamm. “Even at Denny’s you are making $20 bucks an hour on most of them.”

“Labor cost is not accounted for in our current menu price,” explained Alec Najem, bar manager at Savor Restaurant in Carmel, “If you were to get rid of tipped employees, now we have to account for labor costs we didn’t have to before.”

Both Tamm and Najem suggest the end result would lead to a raise in menu prices to cover the costs. Najem says any thought of operating the $15 minimum wage plus tips would be an end to the hospitality industry.

“That would cut too deep into costs. There would be no way,” explained Najem.

When he tends bar at Savor, Najem says he can make anywhere from $35 to $50 an hour. He went on to say tips also help businesses know who is doing well for you, and rewards them for their hard work.

“How do I tell them to serve the same experience when they aren’t going be compensated for it?” questioned Najem. “The good servers won’t stay around because these good servers are worth more than $15 an hour. If we can’t give them that, why would they stay around?”

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