Pandemic Effect on Minimum Wage and Tip Credit for Restaurants

By | September 21, 2020

Article from Nation’s Restaurant News Sep2020 – Despite fewer workers and less hours, labor costs are rising


“I do think wages will be going up whether it’s federally mandated or not. We are going to have to up the wages we pay to attract a better-quality person,” said Frank Tucker, a restaurant consultant and former global chief people officer at Taco Bell.

That trend is playing out in some states in the full-service sector, according to a late August workforce report by restaurant analytics firm Black Box Intelligence.

The average state saw an increase of 5.2% in hourly wages for line cooks in the second quarter compared to the same period last year, according to Black Box, which uses line cook wages as a key indicator because it excludes the effects of tips.



Restaurant owners say giving up the tip credit levels the playing field between front and back of house, while also allowing the server to earn a consistent wage when they’re called back to work at a time when dining out traffic is low.

For some, there’s another reason for this movement: ending racial inequality, says labor advocacy group One Fair Wage.

The organization, which supports ending the tip credit, released a report this summer that examines how the tipped wage perpetuates racial and gender inequality in New York as measured by government data and interviews with restaurant workers during the COVID-19 pandemic.

The report concluded that the subminimum wage for tipped workers resulted in a nearly $5 per hour differential in wages (including tips) between Black women and white men among tipped workers nationally.

With tips down at least 50%, this gap is impacting “workers of color and women of color” more during the pandemic, the report states.