Tip credit elimination in Connecticut would do more harm than good
Author: Annie Nguyen
Publication Date: December 2023
Newspaper: The Hartford Courant
Earlier this year, SB 1177, which would have eliminated the tipped minimum wage, was tabled by the state Senate after hearing concerns from local businesses and employees. Now, labor committee co-chair Sen. Julie Kushner has announced plans to reintroduce the plan again in January – despite its proven track record of consequences elsewhere across the country.
As a former Windsor, Connecticut resident, my family still operates two restaurants in the state. I also worked as a server for two years. This bill would do more harm than good for employees and restaurants.
Connecticut’s tip credit system, based on a $6.38 hourly base wage, currently allows servers and bartenders to count tips toward the minimum wage requirement. Under this system, employees in Connecticut earn as high as $32 per hour. During my time as a server, I earned over $200 in tips alone on a Friday night, working only a few hours.
With already low profit margins, restaurants cannot take another blow. A 145 percent hike in tipped wages could further push businesses over the edge. Even after the pandemic, restaurants in the state struggled to survive. Zingarella, a Southington favorite, closed after a decade and cited that the cost of food and skyrocketing inflation alongside other hurdles made it difficult to survive.
Economists have documented tipped wage increases around the country could force restaurants out of business. A Harvard Business School study found that for every $1 increase in the minimum wage, the likelihood of restaurant closure increases by 14 percent.
While the proposed bill would raise hourly wages servers and bartenders receive on a paycheck, it would alter the existing tip system that allows these employees to make more than double the regular minimum wage. Instead of raising pay, this proposal could actually limit employees’ earnings as restaurants and customers are forced to adapt.
Restaurants may follow the lead of others in Boston and Washington, D.C. which have seen a rise in service charges to adjust to rapidly rising wages. These charges, which are not the same as tips, are mandatory fees added to the bill.
In places that have tried overcoming tip credit elimination by using service charges, diners are becoming increasingly frustrated with the changes and have expressed they would not tip on top of extra fees.
Economists have observed that as tipped minimum wages increase, the percentage of tips decreases. This trend is evident in states such as California and Washington, which have no tip credit and boast some of the lowest tipping percentages in the nation.
This translates to roughly $8 million in lost earnings for tipped employees in Connecticut, according to Miami and Trinity University economists.This loss would be a direct consequence of restaurants needing to manage rising labor costs while maintaining customer affordability.
This phenomenon is playing out elsewhere in the country where tip credits have already been eliminated, including in Washington, D.C., where servers are already reporting reduced tips and restaurant operators have announced closures or switching over to counter service instead of sit-down dining.
It’s no coincidence that every single one of Connecticut’s neighbors still maintains the tip credit. This isn’t just lawmakers’ decision; it’s the result of a grassroots movement led by tipped employees themselves. These workers, whose tips make serving a profitable livelihood, have made their voices clear: they aren’t asking for this system to change.
Ignoring these economic realities will bring devastating consequences for Connecticut’s restaurant scene and decimate the livelihoods of servers and bartenders. Lawmakers should heed the consequences playing out across the country and instead listen to local employees who say the system works and doesn’t need to be changed.