Initiative 82, also known the “District of Columbia Tip Credit Elimination Act of 2022,” was passed in November 2022 and will go into effect beginning May 1, 2023. Initiative 82 will eliminate the tip credit by increasing the tipped minimum wage every year until 2027. Once finalized, the tipped minimum wage will match the standard minimum wage.

To better understand the impact of increasing the minimum wage for tipped workers and eliminating the tip credit for D.C.’s restaurants, a survey of 105 restaurant operators who employ workers who earn tips was conducted in April 2023.

Key findings include:

A strong majority of operators (86%) think the tipped minimum wage increase to $8 by July 2023 will have a negative impact on their operation(s).

As a result of the increases in 2023 and through 2027, a majority of restaurants say they will be forced to raise menu prices (79% by 2023; 80% by 2027), reduce staff or consolidate positions (63% by 2023; 72% by 2027) and reduce employee hours (62% by 2023; 70% by 2027).

Some restaurants indicated they will take additional measures to offset tipped minimum wage increases by 2027, including:

• Seventy percent said they will introduce automatic service charges to customers' bills,
• Forty-six percent said they would introduce other automatic fees for customers (i.e. "Fair Wage" fee),
• Forty-six percent said they would open any future locations in surrounding jurisdictions, such as Maryland or Virginia,
• Thirty-eight percent said they would substitute automation or self-service technology for employee tasks,
• Twenty-five percent said they would change their restaurants' service model to include more quick service or counter service,
• Twenty-two percent said they would adopt a no-tipping required policy, and
• Thirty-one percent said they would have to close one or more locations.

Eighty-five percent of restaurant operators believe increases to the tipped minimum wage will force them to decrease the number of tipped workers in their restaurants by 2027.

Ninety-two percent say prices will increase in response to the tipped minimum wage increase to $8 per hour by July 2023, with 43% saying prices will "significantly increase. However, 98 percent operators believe think that raising menu prices will adversely affect customer foot traffic. Three-fourths (74%) think it will limit or reduce raises for kitchen and other non-tipped staff (somewhat likely, 19%; very likely, 55%).