$17 per hour and no tip credit? Restaurant group makes dire predictions


“We’ll fight for restaurant workers to keep the current system of tipping and that high-earning potential.”

— Sean Kennedy, National Restaurant Association

The National Restaurant Association is raising grave concerns over the proposed Raise the Wage Act of 2023, which looks to increase the federal minimum wage from $7.25 to $17 per hour over five years —and eliminate the tip credit.

For the uninitiated, the tip credit is the amount of tips earned by an employee that the law allows his or her employer to take as a credit against the minimum wage requirements for a particular industry.

Sean Kennedy, executive vice president of Public Affairs for the National Restaurant Association, called its elimination a “non-starter” when it comes to the perspective of restaurants.

“We look forward to discussing with Congress the unique challenges of restaurant operators and how to plan changes, so they don’t threaten business viability or damage the economies of the communities where restaurants drive job creation and tax growth,” he said.

“But eliminating the tip credit as a compensation model is a non-starter. This would have the perverse effect of lowering the take-home pay for countless workers who have tipped restaurant jobs. Their median income is $27 an hour, far above the proposed changes, so we’ll fight for them to keep the current system of tipping and that high-earning potential.”

Should the tip credit be eliminated, operators would go from paying $2.13 per hour to $17.00 per hour, an increase of $14.87 per hour for the operator to bear alone, Kennedy said.

In an industry that operates on 3 to 5 percent pre-tax margins, he described this as an impossible situation for owners, and one that will result in restaurants closing, and good jobs lost.

“Restaurants can’t easily absorb or pass on cost increases,” reads Kennedy’s notice, distributed to the media Wednesday, which also takes note of the SBA loans that have come due for operators post-pandemic.

“More than 15 million people choose to work in restaurants, many of them professionals who have built strong, long-term careers,” Kennedy said. “In recent years, the market demand for both experienced and entry-level restaurant workers has pushed their average earnings from $15.06 in May 2019 to $19.67 in May 2023 – a 31 percent percent growth, 20 percent higher than the overall private sector.”

Kennedy implored Congress “to better understand the current condition of restaurant employers and the thousands of restaurant workers in their states so they can better understand how they would be impacted by these proposed changes.”

Greater Long Island stock photo