Feb 5, 2024 - News

Mirroring D.C., Maryland has a fight over the tipped minimum wage

One Fair Wage president Saru Jayaraman in D.C. Photo: Mandel Ngan via Getty Images

The fight to raise the base wage for tipped employees in Maryland is heating up.

Why it matters: Mirroring D.C.'s Initiative 82, a proposed state bill would phase out the tipped minimum wage for workers while increasing what employers pay staff — a change with big implications for diners as well as the industry.

State of play: Tipped workers in Maryland currently make $3.63 an hour. Employers are legally required to make up the difference for any tipped employee who falls short of the state minimum wage of $15 per hour.

  • The bill would incrementally increase tipped employees' base pay until it's the same as the state minimum wage in 2027 (e.g. a boost up to $8.50 in January next year, then $10.50 in July, and upwards).

Driving the news: Both sides clashed last week at the Annapolis statehouse: Pink-clad supporters of the legislation versus green-wearing "Save Our Tips" organizers who oppose the change.

  • The legislation is backed by the Massachusetts-based nonprofit group One Fair Wage which successfully enacted I-82 in D.C.
  • The group's president, Saru Jayaraman, demanded "a full minimum wage with tips on top." They believe that higher wages don't impact tips, citing data from financial services platform Square that show diners did not tip less in states that ended the subminimum wage.
  • Supporters recently withdrew a local bill in Montgomery County to devote resources to a big statewide push. It's their third attempt in recent years.

The other side: Opponents of the bill argue that it will kill tipped jobs, slash employee earnings, and put restaurants — particularly small, independent ventures — out of business.

  • Servers and bartenders, who have long battled on both sides of the movement, argued that diners will become less generous with tips — especially when confronted with service fees, which have become rampant with rising labor costs.

What's next: The bill still has a ways to go, with approval needed in both chambers. If passed, it'll go into effect in October.

The big picture: Eight states and the District have eliminated or are phasing out the tipped minimum wage.

Yes, but: The process hasn't been easy since D.C. voters overwhelmingly passed I-82 and it took effect last spring. In a survey of nearly 300 D.C.-area hospitality businesses, the Restaurant Association of Metropolitan Washington found that more than a third of restaurants experienced a significant drop in sales and traffic and that nearly all of the restaurants have increased prices.

  • A concurrent poll by the National Restaurant Association of nearly 950 D.C.-area adults found half are dining out less due to rising costs.

The law has driven some restaurateurs to avoid expanding in the city. Silver Diner's chief people officer Chris Shand tells Axios the local mini-chain "is actively not pursuing" other locations in D.C., or in Montgomery County, where the bill was on the table last year.

What they're saying: "We're certainly saying watch D.C. Watch what happened, and don't do what they did," Rebekah Paxton, research director at Arlington-based Employment Policies Institute, tells Axios.

Yes, but: People are still dining out in D.C. More new restaurants opened in the city last year than closed (or that opened in 2019).

  • "D.C. is never going to be a dead zone for restaurants," Paxton admits. "We're just seeing reports from restaurants that it's harder than ever to stay in business."
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