Government, Human Resources, and Retail

Restaurant association hits minimum wage proposal

The $2.65 tip worker minimum would eventually go to $9.50.

February 14, 2014
| By Pete Daly |
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The Michigan Restaurant Association wasted no time last week in responding to a new push to raise the Michigan minimum wage — including the minimum paid to workers in bars and restaurants whose compensation is largely tips.

The MRA said only seven states have eliminated the tipped minimum wage, which in Michigan is now $2.65 an hour. If the Raise Michigan organization has its way, tipped workers would get an 85 cent raise every year until their minimum wage reaches $9.50. Michigan’s minimum wage for all other workers is now $7.40 an hour but also would go up to $9.50 under the proposal.

Raise Michigan was organized by Michigan United, a coalition of faith-based organizations, labor unions and civil rights groups that are mainly located in southeast Michigan but a few of which are in central and western Michigan.

Brian DeBano, president and CEO of the MRA, said in a statement released the same day the Raise Michigan proposal came out that the MRA believes “this is the wrong plan at the wrong time for Michigan’s fragile economy. With participation in the work force at a 35-year low and Obamacare only adding to that problem, why make it even harder to get a job? Make no mistake, this government mandated wage hike that completely eliminates the tipped minimum wage will not only increase menu prices and cost Michigan jobs — it will put many restaurants out of business.”

Although the tip worker minimum wage is $2.65, nobody makes less than the standard minimum wage of $7.40, according to Jeff Lobdell, principal owner of Restaurant Partners, which has 16 restaurants and food service businesses from Traverse City to Kalamazoo.

“If they ever make less than $7.40 an hour, the business makes up the difference,” explained Lobdell. He said that is part of the state law. “Virtually all servers average $15 to $20 an hour” with their tips included, said Lobdell.

He said if the tip worker minimum wage was increased as proposed, many restaurants would be forced to “convert to quick service” — in other words, counter service — because they couldn’t afford to have many servers.

A lively debate on raising the minimum wage is underway in states as well as in Congress, with President Obama endorsing a federal minimum of $10.10 an hour during his State of the Union address Jan. 28. Food service workers have been in the forefront of the national debate, actively demonstrating in favor of an increase at many fast food restaurants. Because they are not working for tips, fast food workers earn at least the standard $7.40 minimum in Michigan.

Last week Raise Michigan submitted petition language to the Secretary of State’s office. The organization plans to try to gather 350,000 signatures; 258,000 valid signatures are required to force the question onto the statewide November ballot.

The 258,000 valid signatures are due in early July, and the citizen-initiated legislation would then be turned over to the Legislature, which could simply approve the proposal, making it law, or it could go on the November ballot.

Many Michigan Republicans and the Michigan Chamber of Commerce oppose increasing the minimum wage, according to the Detroit Free Press.

The Raise Michigan proposal would increase the minimum wage by 50 cents Jan. 1, 2015; by another 50 cents June 1, 2015; and by $1.10 Jan. 1, 2016, to $9.50 an hour. Raise Michigan would also increase the minimum for restaurant and bar employees who work for tips.

The MRA said “restaurants exist on a razor-thin profit margin of 5 percent before taxes. Eliminating the tipped minimum wage will dramatically increase their overhead and unequivocally cause some restaurants to shutter their doors.” It continued: “Mandates like these are hurting ‘mom and pop’ restaurants.”

“It is critical to understand that the minimum wage is a starting wage and rarely received by either full-time employees or those acting as head of the household,” said the MRA.

Lobdell said less than 2 percent of his approximately 1,000 employees in 2013 were started at minimum wage. Those who were are primarily teens on their first job or individuals with disabilities who would not otherwise be hired.

Although he is totally opposed to eliminating the tip worker minimum wage at bars and restaurants, Lobdell said he is not opposed to a public debate about increasing the general minimum wage.

“It’s been awhile since the minimum wage was increased,” he said. “I definitely think it’s worth looking at,” conceding “the public sentiment is that the minimum wage should go up.”

Lobdell, who owns the Beltline Bar and Sundance Grill in Grand Rapids, among others, was president of the Michigan Restaurant Association in 2007 and was just made a member of the board of the National Restaurant Association, based in Washington, D.C.

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