DC Restaurants Lost Hundreds of Jobs Since Initiative 82 Began
Tip Credit Elimination Isn’t What Tipped Workers Signed Up For
Publication Date: November 2023
Arlington, Va. – Wednesday, November 8, marks the one year anniversary of Initiative 82, a measure that has changed the District of Columbia’s dining scene for the worse.
Initiative 82, passed on the ballot by voters in 2022, was implemented earlier this year to begin eliminating the District of Columbia’s tip credit. The new law will more than triple the minimum wage for tipped restaurant employees by 2027, but is already wreaking havoc on D.C.’s restaurant industry and employees in its first year.
According to new data and reporting since implementation on May 1, 2023, the District is already experiencing job losses, earnings loss for employees, and rising service charges as restaurants scramble to adapt:
- Full-service restaurant employment is down 2.4% from May through September 2023, or roughly 700 jobs in just four months. Compare that to nearly 4% growth over the same period in 2022. This is uniquely hurting full-service restaurants: both the larger hospitality industry and limited-service restaurant industry have experienced positive employment growth during this period this year.
- Employees have already reported seeing fewer tips in their pockets.
- Restaurants have announced closures or plans to pivot to fast-casual models.
- Over 200 local restaurants have turned to service charges to adapt to rising wage bills.
Rebekah Paxton, director of research at the Employment Policies Institute, issued the following statement:
“Proponents of tip credit elimination continue to ignore the harsh realities their signature policy brings wherever it goes. Not even one year into the city’s tip credit phase out, and D.C.-ers are already saying this isn’t what they voted for. It’s clear Initiative 82 was a mistake, yet One Fair Wage would rather count a political victory while restaurants and their employees are left with the devastating aftermath.”
The early data confirms the findings of EPI’s April 2023 survey of over 100 restaurants in Washington, D.C. on how Initiative 82 would affect them, with alarming results:
- Eighty-five percent of operators indicated Initiative 82 will force them to reduce the number of tipped staff in their restaurants by 2027.
- Operators were concerned about future viability in D.C.: 46 percent indicated they would open any future locations in neighboring Maryland or Virginia, and 31 percent indicated they may be forced to close by 2027.
- Three out of four operators indicated Initiative 82 will limit raises for kitchen and other non-tipped staff.
- Seventy percent have added or plan to add mandatory service charges to customer bills, while nearly a quarter plan to eliminate tipping in their restaurants entirely.
- In November 2022, voters approved Initiative 82 to eliminate the city’s tip credit by 2027.
- Prior to this new law, D.C. restaurants were required to pay tipped employees a base wage and ensure that tips made up the full minimum wage, then $16.10 per hour but annually increased based on inflation.
- The first scheduled increase was up to $6 per hour on May 1, 2023. The second increase came just two months later, up to $8 per hour on July 1, 2023.
- This follows an extensive body of economic research that shows tip credit elimination is harmful for restaurants and their employees.
- Every $1 increase in the minimum wage increases the likelihood of restaurant closure by 14 percent.
- Every $1 increase in the tipped minimum wage causes 6.1% job loss and 5.6% earnings loss for tipped employees.
- As tipped minimum wages are increased, tipping percentages decline. Jurisdictions that have already eliminated the tip credit have some of the lowest tipping percentages in the country.
- One Fair Wage is holding a celebration event on November 8, 2023 marking one year since Initiative 82 was passed. The national labor activism group has since slammed D.C. restaurants for using service fees as a way to adapt to rising wages – but several years ago itself endorsed this policy for restaurants that eliminate their tip credit.
EPI launched ServiceChargeFacts.com to provide clear and concise information about the relationship between service charges and tip credit elimination.
Read EPI’s tip credit primer to learn more about how the tip credit works and why employees across the country are fighting to preserve it.