New Data Shows Restaurants Are Bracing for Tipped Wage Hike in DC
Majority of D.C. Restaurants Say They Will be Forced to Lay off Staff, Close Locations, or Move Outside of DC
Publication Date: April 2023
Topics: District of Columbia
Arlington, Va. – Today, the Employment Policies Institute (EPI) released new survey results that find District of Columbia restaurant operators are bracing for the negative consequences of the city’s tip credit elimination beginning May 1, including anticipated staff reductions, fewer raises, steep price increases, and restaurant closures.
Key findings from the survey of more than 100 D.C. operators:
- Eighty-five percent of operators indicated tip credit elimination will force them to reduce the number of tipped staff in their restaurants by 2027. Two-thirds plan to decrease tipped positions this year.
- Three out of four operators indicated the rising tipped minimum wage will limit raises for kitchen and other non-tipped staff.
- Ninety-two percent of operators believe elimination of the tip credit will cause price inflation; 98 percent also believe raising menu prices will discourage customer foot traffic.
- Operators are finding D.C. to be a difficult market for restaurant survival: 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.
- 70 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.
This new data comes as over 150 restaurants across the District have already shifted from a regular tip credit plus tips system for their front of house staff, to automatic service charges to account for rising costs.
EPI’s executive director, Michael Saltsman, said:
“Tip credit elimination is a solution in search of a problem. Restaurant operators, tipped workers, and economists all warned about the drastic negative consequences of Initiative 82. This survey shows the fears were warranted. It’s incumbent on the D.C. Council to take steps to mitigate or offset the impact of tip wage elimination, and surrounding localities should view this as a cautionary tale.”
Lloyd Corder, CorCom, Inc. president and CEO and Carnegie Mellon adjunct professor who conducted the survey, noted:
“Our survey results show that tipped wage elimination will likely result in higher menu prices, a reduction in staff hours, and reduced employee headcounts. Policymakers concerned about the unintended consequences of this policy should pay careful attention to the results.”