Chris Dudley and the minimum wage "tip credit"
Kari Chisholm
There's been a lot of discussion here in Oregon and nationally about Chris Dudley's statement that "it doesn’t make sense that our waitresses are getting tips plus the highest minimum wage in the country."
Why is he taking on "waitresses"? (Please, Chris, let's not make this a gender thing, OK?)
Here's the deal: In just over a dozen states around the country, the minimum wage isn't actually the minimum. In those states, workers that receive tips from customers are paid a sub-minimum wage by their employers.
This does not, of course, make a damn bit of sense. A wage is what you get from your employer for the time you spend helping your employer earn a profit. A tip is a gratuity, money offered voluntarily directly by the customer in gratitude for good service.
But, since restaurant owners tend to be politically powerful -- both individually in local communities, and as a group at the state level -- they've managed to finagle an exception to the minimum wage.
Here's how the "tipped" minimum wage breaks down around the country:
- Hawaii, $7.00
- Connecticut, $5.69
- Illinois, $4.95
- Iowa, $4.35
- Florida, $4.23
- Colorado, $4.22
- Vermont, $3.91
- Maine, $3.75
- Ohio, $3.65
- Maryland, $3.63
- Rhode Island, $2.89
- Massachusetts, $2.63
- Wisconsin, $2.33
- Wyoming, $2.13
So, the question for Chris Dudley is this -- how low do you believe the minimum wage should go in Oregon?
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11:00 p.m.
Sep 25, '10
Full disclosure: My firm built John Kitzhaber's website. I speak only for myself.
1:16 p.m.
Sep 26, '10
Why the video taken mid-sentence instead of the in context full video you've had online here for a week?
4:57 p.m.
Sep 26, '10
I have to agree with Michael. This would seem like a more honest criticism if you didn't edit this version of the videotape so deceptively--not just at the beginning, but at least twice during the rest of it--when you've been running the entire segment uncut on BlueOregon for a week or so.
5:30 p.m.
Sep 26, '10
In all fairness to Kari, I don't believe he is the one who edited the video. I rec'd the same video from Trent Lutz at DPO Saturday.
10:59 p.m.
Sep 26, '10
Um, I didn't edit it. FWIW, I think it neatly encapsulates the main point of discussion - without all the inarticulate hemming and hawing from Chris Dudley.
Here's the full transcript (my emphasis):
Well it’s not a – it’s a – I agree with you on – on – on that issue. Um it’s one that is very difficult to ex – it takes time to explain so that people understand why you’re talking with – with having the highest minimum wage in the country uh negatively impacts the state, um it’s something that I, from an economic standpoint, I understand and you talk to restaurants, restaurants will say listen, we’ve got less employees than we would otherwise because of this and it doesn’t make sense that our – our waitresses are getting tips plus the highest minimum wage in the country where our – those in the back – there’s a dispri-disproportionate amount of compensation, there’s so many negative issues with it that I think need to be addressed. Um so it’s something I’m – I’m not going to make a forefront campaign issue on it because I think it’s something – it’s a hot button that people don’t really understand, um but at some point I’m – I’m well aware of the issue and I’m also concerned about with – with – I’m very concerned in our state that we have unemployment rate uh between ages 18 and I think it’s 22 it might be 24 of 35 percent in our state. And in minority population it’s above 50 and what I get concerned about is if you don’t learn how to work it gets harder and harder to get in the workforce and so I think it’s very conc- that – that’s one area I would like to tackle first is to at least get a training wage going um to get people so that they at least have the opportunity to work and I think – think we’re really hurting our future by – by not doing so.
1:57 a.m.
Sep 27, '10
Transcript of exchange here:
[Questioner]: Alright, thanks again Chris for coming. Um, my question comes back to labor and labor costs. Um, I’ve noticed that our state tends to have a very high minimum wage and uh I think that’s difficult for our businesses but I think it uh, it also attracts uh people from other states to come to our state and take our jobs away from our kids and uh and those that might need them. I think it attracts the wrong end of the labor pool to our state uh and they tend to stay here and uh – uh I uh I – I’m concerned about that, I’m interested to know what your – if you share that philosophy and if you have any idea what – what you would do about that or if you want to address that issue.
[Dudley]: Well it’s not a – it’s a – I agree with you on – on – on that issue.
www.dpo.org/news/pr/2010-09-20/chris-dudley-announces-first-priority-lower-minimum-wage
Do I detect a hint of Social Darwinism in this exchange? I mean "[our minimum wage] attracts the wrong end of the labor pool to our state uh and they tend to stay here and uh – uh I uh" sounds an awful like hommie doesn't like your "tired, your poor, your huddled masses yearning to breathe free."
And, Mr. Dudley agrees with him.
2:10 p.m.
Sep 27, '10
How is it out of context Michael, or "deceptive" Jack?
11:26 a.m.
Sep 26, '10
My husband and I have made a way to fight back, and I credit you, Kari, because I think you had the idea here. We made little pieces of paper to print out and leave at tables and in tip jars. The PDF can be found here:
http://bodiegroup.posterous.com/pdf-of-dudley-quote
6:42 a.m.
Sep 27, '10
Great idea. I took the liberty of formatting it to fit Avery® Business Cards for Inkjet Printers 8371, for those of us too lazy to use scissors. Download here.
11:58 a.m.
Sep 26, '10
@Sonya Lee - thats a great idea...I'm definitely printing some of those up...
It doesn't make sense to me that a class of workers already at or near the poverty line should have their wages further reduced because they are getting tips. It's like saying sure you could make 40K a year if you do a good job, but 20K of that might not happen. Especially in hard economic times reliance on tips to make ends meet is flimsy at best.
1:01 p.m.
Sep 26, '10
Dudley: "You talk to restaurants and restaurants will say listen: we've got less employees than we would otherwise because of this and it doesn’t make sense that our waitresses are getting tips plus the highest minimum wage in the country."
The full, in context video is at: http://www.blueoregon.com/2010/09/457000/#c500734
2:53 p.m.
Sep 26, '10
How does one talk to a restaurant?
3:19 p.m.
Sep 26, '10
If this wasn't Dudley's position, why would he reiterate this quote? He's already (mis)-stated that Oregon has the highest minimum wage, before he gets here. Then he's using this to buffet his point.
Watch the snippet or watch the full context, either way this is Dudley's point and Dudley's belief.
3:47 p.m.
Sep 26, '10
His point is that Oregon's high min wage inhibits hiring and was using the quote to support the claim.
Please name states 51-57 :-)
6:34 p.m.
Sep 26, '10
He wouldn't have used the quote if he didn't buy into it, Michael. This is quite a hair you're attempting to split.
11:01 p.m.
Sep 26, '10
Exactly. He also opens his statement with "I agree with you" - a response to the questioner who was making the anti- minimum wage argument.
3:27 p.m.
Sep 26, '10
Dudley could have said "I don't agree with you" to the questioner if he had any sense.
HE DIDN'T. Instead, he tackled it, ineptly. I'm sorry it isn't setting well with you, but people KNOW what he was saying in it's full context.
3:44 p.m.
Sep 26, '10
But Oregon's high min wage does inhibit hiring in some industries and does hurt young inexperienced workers trying to enter the workforce.
If you wish to challenge this, please provide unbiased proof that the statement is wrong and I will gladly retract it.
4:10 p.m.
Sep 26, '10
What inhibits hiring is lack of business coming in the door.
5:33 p.m.
Sep 26, '10
Actually more so today than at other times. A lack of revenue makes it even harder for business to hire inexperienced workers.
2:14 p.m.
Sep 27, '10
Exactly. Min. wage has nothing to do with it. It is sophistry for you and Dudley to claim otherwise.
4:41 p.m.
Sep 26, '10
Michael,
It's not my responsibility to disprove your claim. First, in order for your claim to be considered, you need to provide some evidence to support it. You can't just make a claim, then demand that others prove you wrong.
So, please provide unbiased proof that Oregon's high minimum wage inhibits hiring.
5:32 p.m.
Sep 26, '10
I am just employing the BO standard of truthiness...if I say it it is true.
8:37 p.m.
Sep 26, '10
Actually, Michael, in my experience writers on BO tend to do a good job of backing up what they claim. For example, this post actually has a clip showing Chris Dudley's statement.
If you think about it, people making minimum wage are likely to spend a large percentage of the extra money they make, putting it back into the system. Owners of restaurants are likely going to spend a smaller percentage of the extra money they make, so that stimulates the economy less, thus leading to fewer jobs.
It's similar to the effect of taxes on the wealthy. In Reagan's first year, taxes on the wealthy were cut, yet unemployment jumped the month the tax cut was signed, and went from 7 - 7.5% to over 10% in a short amount of time.
When Clinton raised taxes on the wealthy, there was talk of doom and gloom from the right, but unemployment dropped every year of his Presidency, not going up again until tax-cutter GW Bush took office.
11:03 p.m.
Sep 26, '10
Sorry, buddy. We've always challenged people to provide sources and links. There ain't no "say it and it's true" standard here.
2:13 p.m.
Sep 27, '10
Really, so Washington state, which has a higher min. wage is inhibited in hiring in some industries and hurts young inexperienced workers?
Please provide evidence to support any of those claims please.
7:06 a.m.
Sep 27, '10
Some anecdotal evidence from 21 years helping my friends at their small (27 seats) burger joint in the Hollywood district, (did the YTD spreadsheet).
Payroll was never more than about 25% of operations, usually around 21-23%. Food costs on the other hand were always around 30+%. When the price of tomatoes went up, that was something to worry about.
Always paid staff more than minimum wage and the business always grew and turned a profit.
A happy staff, good service and a fair priced product will always beat penny pinching bean counters. Also leads to good tips.
8:00 a.m.
Sep 27, '10
Grant, good info. My experience, as well. Every year that minimum wage goes up (is indexed) we hear the gloom and doom of lost jobs. But it does not play out. My (rhetorical) question is, if our economy is driven by consumer spending and consumers don't make a liveable wage and have no money to spend, then what? BTW - minimum wage is not a living wage. Even with more than one in a household making it. Most of the time the workers don't get full-time hours.
11:18 a.m.
Sep 27, '10
Kai, I appreciate you posting the entire transcript, but I would have emphasized a different portion of it:
"I’m very concerned in our state that we have an unemployment rate between ages 18 and I think it’s 22--it might be 24--of 35 percent in our state. And in minority populations it’s above 50. And what I get concerned about is if you don’t learn how to work it gets harder and harder to get in the workforce and so I think it’s very conc- that – that’s one area I would like to tackle first is to at least get a training wage going um to get people so that they at least have the opportunity to work and I think – think we’re really hurting our future by – by not doing so."
I think those sentiments are shared by a lot of parents as well as young people who are trying to find work.
11:28 a.m.
Sep 28, '10
Cuz a "training wage" (meaning the person is paid less) would mean that unemployment in Oregon would go down? Please cite your source for this contention.
11:37 a.m.
Sep 27, '10
Factual correction: More than "just over a dozen" states allow some sort of tip credit or lower wage for tipped employees. In fact, only 7 don't. From the department of labor: http://www.dol.gov/whd/state/tipped.htm
11:29 a.m.
Sep 28, '10
How many of these states have the same or higher unemployment as Oregon?
12:57 p.m.
Sep 28, '10
Probably very few, given that Oregon has one of the highest unemployment rates in the country. But the effect of our high minimum wage/no tip credit is probably reflected more in the number of restaurant jobs than in overall employment numbers.
8:25 p.m.
Sep 27, '10
Why Don't those who approve the cut go actually out and work as a waitress or waiter and actually see how much of a paycheck you DON'T receive? And let's see you take care of picky people day in and day out. We deserve our tips AND our wages.I will NOT be voting for Dudley and you can bet your ass many many (all) servers will also not vote for him. Just think about how many restaurants are out there on each block.........you can bet your ass i will be telling all my fellow servers!!
9:54 a.m.
Oct 3, '10
I've worked in the restaurant industry in Oregon for much of my adult life. At one point, I know service industry was the top economic generator in the state, so think of what the impact will be to the overall economy if the wages of that industry are cut as significantly as Dudley suggests--for Portland, it will be like the construction crash was in Central Oregon last year. A second consideration is this--restaurant work is customer service and light manual labor. Workers such as Trimet drivers, road construction flaggers, and all sorts of other customer service and/or light manual labor workers get paid somewhere between $20-30 an hour, or more. Restaurant owners are already getting a huge break in being able to externalize so much of a server's pay to the public through relying on their workers to be paid tips. The restaurant industry is alive and well in Oregon; it is only misguided greed that is driving Dudley's initiative.