On Wednesday, the Rhode Island House Labor Committee will hear public testimony on House Bill 7531, which would eliminate the state’s tip credit and more than triple the current required hourly wage for tipped employees.

Rebekah Paxton, research director for the Employment Policies Institute (EPI), submitted written testimony ahead of the hearing, highlighting the adverse impacts this policy would have on Rhode Island’s servers, bartenders, and restaurants. Her testimony (available here) will include:

• Data on the statewide consequences of tip credit elimination, which would kill an estimated 1,900 jobs over the next several years and lead to $10.2 million in lost earnings for tipped employees in the state.

• The disastrous fallout from a similar proposal in Washington, D.C., where the full-service restaurant workforce has declined by 12%, and the rate of restaurant closures is the highest since the pandemic;

• Evidence showing states that have eliminated their tip credits have the lowest tipping percentages in the country; and

• Insights from economic studies on the harmful track record of these policies across the country.

Ahead of the hearing, Paxton issued the following statement:

“Proposals like this have been opposed by actual tipped restaurant employees across the country for years, including last year in Rhode Island when the Labor Committee tabled a similar bill.  Decades of economic evidence show that tip credit elimination kills jobs, reduces employees’ take-home pay, and shutters restaurants. The legislature should avoid bringing the D.C. restaurant disaster to Rhode Island.”

*** The hearing will begin at 4:00 pm on Wednesday, March 27 in the State House Room 101. A livestream can be viewed here.***

BACKGROUND

Economists and employees alike reject this policy as a way to help tipped restaurant employees. Research indicates that eliminating tip credits causes earnings and job losses for restaurant employees, and forces businesses to shut down. Substantial research finds:

• Every $1 increase in the tipped minimum wage causes 6.1% job loss for tipped restaurant employees;
• Eliminating Rhode Island’s tip credit could cost 1,900 servers and bartenders their jobs;
• For families of tipped employees, tip credit elimination could reduce their earnings by up to $6,031 annually;
• 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.
• Last year, Washington, D.C. voters approved a similar ballot measure to eliminate the tip credit citywide. Since its implementation began in May 2023, D.C. restaurants are already experiencing 12% fewer restaurant jobs, servers are losing tips, and restaurants are closing down at a higher rate than years past as a result of tip credit elimination.