Tip Credit Elimination in Montgomery County Would Cost Employees Thousands in Earnings
Publication Date: September 2023
Arlington, Va. — On Tuesday, members of the Montgomery County Council are expected to introduce a bill to eliminate the tip credit countywide, raising the minimum wage for tipped restaurant employees by over 300 percent. This harmful policy has been rejected twice in recent years by Democrats in the state legislature.
Ahead of the bill’s introduction, Rebekah Paxton, Director of Research at the Employment Policies Institute (EPI), released the following statement:
“Employees, economists, and restaurants oppose tip credit elimination because it harms everyone affected. In neighboring Washington, D.C., diners and employees are frustrated by the aftermath: higher menu prices, more service charges, and lower tips for employees. Earlier this year, Maryland Senators listened to employees and abandoned this misguided policy. Montgomery County lawmakers should do the same.”
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 Montgomery County’s tip credit could cost thousands of employees their jobs;
For families of tipped employees, tip credit elimination could cost them up to $8,000 a year in household earnings;
Earlier this year, Maryland tipped employees testified before state Senators, urging them to reject a statewide proposal to eliminate the tip credit and protect their tips instead. To read more about how the tip credit works and why employees are fighting to preserve it, see EPI’s tip credit primer here.