Andrew Cuomo’s Awful Proposal To Eliminate New York’s Tip Credit
Author: Michael Saltsman
Publication Date: December 2017
Topics: Tipped Wage
In 2013, Gov. Andrew Cuomo was selected one of the worst Governors in America. With his latest proposal to trash New York’s minimum wage for employees who earn tip income (such as restaurant servers), it appears he’s gunning for the title again in 2018.
A quirk in New York’s labor law allows the Governor to bypass the legislature to create industry-specific wage requirements. It’s disturbingly simple: A wage board hand-picked by the Governor holds a couple of hearings and comes back with the conclusion that the Governor has asked it to reach. How’s that for due process?
Not surprisingly, this process yields policy that aligns nicely with the preferences of the Governor’s political backers. Witness the “fast food” wage board, which delivered a $15 minimum wage for the Governor roughly three months after he’d announced the goal on the op-ed pages of the New York Times. His allies at the Service Employees International Union subsequently bankrolled a statewide publicity effort for the Governor, dubbed the “Mario Cuomo Campaign for Economic Justice.”
The Governor has previously used the wage board to engineer a 50-percent tipped wage increase that took effect on December 31st, 2015. The results were predictably disastrous. Numerous restaurants have subsequently closed or cut back, including popular establishments such as Annisa and Da Silvano in New York City, Bob and Ron’s Fish Fry in Albany, the Medici House in East Aurora, McGirk’s Irish Pub in Binghamton, Betty’s in Buffalo, Piggy Pat’s in New Hartford, Longway’s Diner in Watertown, and so on — you get the idea. (The restaurants credit the huge wage hike for their actions–a hike which could not be effectively passed on through higher prices.)
The data are equally discouraging. The latest data from the Census Bureau show that New York lost over 500 restaurants in 2016–after years of steady increases in the number of restaurants. Broadening the metric to include all food service businesses shows a similar trend: New York lost over 400 of these businesses in 2016, the first time the state had a net drop in food service in nearly two decades.
This isn’t a trend unique to the less-vibrant regions of New York–New York City felt the pinch as well. Between 2010 and 2015, employment in the full-service restaurant industry grew at an average rate of 6.5 percent; in 2016, the growth rate slowed to trickle, barely passing one percent. The last time the city experienced full-service employment growth this slow was in 2009–during the worst of the Great Recession.
Of course, there are plenty of reasons to oppose the policy change beyond the evidence showing the last hike’s harm. Servers overwhelming support the status quo, which provides tip income far beyond the minimum wage and helps owners keep prices low. In Maine, an attempt to eliminate the tip credit was undone when over 5,000 servers rallied Republicans and Democrats to their cause. The servers knew the elimination of the tipped wage would put their jobs and tips at risk–not to mention leaving less income for the non-tipped house staff.
The Governor will no doubt hear from many of these servers at the Labor Department hearings in 2018. The question is, will he listen?