Minneapolis brewpub weighs up $300K cost of a $15 minimum wage with no tip credit

Servers at Northbound in Minneapolis earn $28-$30 when tips are included.
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Minneapolis is considering a $15-an-hour minimum wage, and it has restaurants and bars across the city concerned for their futures because it might not include a "tip credit."

Tip credit means that servers' tips are taken into account when calculating their wages, but Mayor Betsy Hodges is not in favor of including what she calls a "tip penalty" in any minimum wage proposal the city is expected to consider this year.

An alternative has been proposed by industry group Pathway to 15, which would see restaurants pay the difference to any worker who ends a week with a wage of less than $15 an hour including their tips.

Among the supporters of this model is the Northbound Smokehouse Brewpub in south Minneapolis.

At Northbound, cooks are paid $13-an-hour and servers get the state minimum of $9.50 an hour plus tips. If a $15 city minimum wage is passed without a tip credit, owner Jamie Robinson will have to increase wages to $15-an-hour not just for his kitchen staff, but his servers too.

He told GoMN he would have to find an extra $337,000 a year to cover this cost – and with the brewpub's balance sheet around $50,000 in the black each year, this would leave a budget gap of $287,000 to plug.

He would probably do this by implementing a "no tip" policy and adding a mandatory 20 percent service charge onto bills. This means customers wouldn't see an increase in menu prices and would effectively pay a tip like they do now, except the tip would go to the business and not the server.

If a $15 minimum wage went forward with a tip credit, the extra cost to Northbound would be a much more manageable $87,000. Robinson says he's in favor of a higher mandatory wage for his cooks and back-of-house staff, which would be covered by a $1 increase in menu prices.

Northbound servers get $28-30 an hour

The impact of not including a tip credit won't just hurt business owners but the servers themselves, Robinson says.

When announcing her opposition to tip credits, Hodges cited Bureau of Labor Statistics figures that found the average wage for Minnesota servers was $10.11 an hour.

But that figure was for Minnesota as a whole, and Robinson said it's not reflective of Minneapolis, where average pay is higher than greater Minnesota.

"We were involved in a voluntary survey of 72 restaurants (put out by the Minneapolis Restaurants Association) that covered high-end restaurants to counter-service coffee shops, and the average server wages came out to $28.56," he said.

That's certainly the case at the Standish neighborhood brewpub, with bartender Bryan Campbell and server Laura Ahrendt telling GoMN that they earn between $28-$30-an-hour when tips are included.

Robinson says he'd be able to pay them around $17-$18-an-hour if a minimum wage ordinance without tip credit was to pass, but this would represent a $10-an-hour pay cut. Both Campbell and Ahrendt said they would look to work in other cities if that was to happen.

"I have to pay my mortgage," Campbell said. "So I'm going to have to do whatever I have to do to keep my income at the level it's currently at, I can't take a pay cut to work under a no-tipping system."

"I'd definitely be going to the suburbs or St. Paul," he added.

This has the brewery's owner worried.

"My biggest fear is that I'll lose staff," Robinson said. "I have worked for five years building up the staff to be high-quality servers and that's because they can earn $25-$30 an hour."

Both Campbell and Ahrendt became delegates at the recent DFL caucuses for Ward 12, and are hoping to make sure their voices are heard at the political level in the coming months.

Minimum wage without a tip credit seems to have majority support at the city council, judging by this Star Tribune report, with proposals expected to be discussed during the summer.

The server's perspective

One of the reasons cited by Mayor Hodges for rejecting tip credit is that it's unfair to female servers, who she says are more likely to be in poverty and also are more likely to face harassment from customers as they try to get the tips they need to feed their families.

There have been several studies to support this claim, including this one in Boston last year, which found tipped workers – most of them women – have to tolerate "a surprisingly large amount of sexual harassment in order to feed their families on tips."

Ahrendt, 32, who has been in the service industry for 15 years, having previously worked at Buffalo Wild Wings and other restaurants, says at every establishment she was earning in excess of $15-an-hour thanks to tips.

She says that she has seen both male and female servers getting harassed before, but says it's only happened to her twice during her career to the point it made her uncomfortable.

Not including a tip credit won't stop this kind of harassment from happening, she says, and nor would it change the way she treats customers.

It would however, change the city where she works.

"I think a lot of us would not still do this if we were only making $15-an-hour," she said.

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