This week, EPI testified on the harmful economic impacts of Maryland’s proposed $25 minimum wage bill – which would also end the current tip credit system for tipped restaurant workers.
While bill proponents from One Fair Wage touted a “success story” of their tip credit elimination law in the District of Columbia – EPI brought federal government data to explain how the bill actually harmed the city’s restaurants and workers, arguing Maryland would not be immune to the same impacts.
When pressed by the committee about how a similar policy affected neighboring Washington, D.C., One Fair Wage claimed there had been no negative impact on businesses, jobs, or tips.
But the data tells a different story – and should be a warning to Maryland. Listen to testimony from EPI’s research director Rebekah Paxton, as well as a Q&A from the Senate Finance Committee here:
EPI’s testimony included the following statistics regarding D.C.’s experiment with tip credit elimination:
- Full-service restaurants and bars – who employ the majority of workers affected by the tip credit – lost 5% of jobs. This loss was five times larger than downturns felt in surrounding Maryland and Virginia counties.
- Servers and bartenders who remained employed said they earned less in tips. In testimony before the D.C. City Council, one server said her average tipping percentage went from 25% to as low as 18% in just one year.
- Data from the U.S. Census Bureau shows this wasn’t just anecdotal: weekly pay (which includes tips) dropped by 5% in the two years following Initiative 82 – that represents more than $1,800 in lost earnings per employee per year. The impacts were worse for those in the lowest income bracket: those in the 25th percentile of earners saw pay decrease by 14%, or as much as $3,400 per employee per year.
- Bureau of Labor Statistics quarterly wage data (reported right from payrolls) shows in this time frame, workers lost a net $11.8 million in earnings.
- D.C. restaurants closed at a record rate not seen since the pandemic.
The impacts were so harmful for the city’s restaurant industry, D.C.’s Democratic Mayor Muriel Bowser and City Council voted to undo the remaining path to full tip credit elimination. Maryland lawmakers would be wise to fully assess the damage caused by this policy in D.C. before bringing it to their own state.