Living Wages

Industry Shake-up: Union Square Hospitality Group Eliminates Tipping

Union Square Hospitality Group, Danny Meyer’s NYC restaurant group, announced yesterday that beginning in November they will be eliminating tipping at their restaurants. Several other restaurants that have made the move over the past two years have switched to a blanket “service fee” that is usually around 18%, but what USHG is doing is pretty radical. They have decided to raise their wages across the board to decrease the FOH and BOH pay divide, and raise menu prices by about 30 percent to pay for the increase in remuneration. Since most people usually tip around 20 percent, they are really only raising prices about 10 percent, and feel that this will be ok for their customers once they get used to it. This is a pretty bold move for a restaurant group that employs about 1800 people. 

So why is this important to us? Black Star has worked with ROC United and RAISE for a few years now, and much of what we discuss when we meet has to do with eliminating the two tier wage system that is prevalent in the industry. Although many states have recently moved to increase the tipped minimum wage from $2.13 an hour, there is still a lot of room for improvement in industry wages for both the front and back of house workers. Black Star’s structure as a member owned business is conducive to the non-gratuity based remuneration, but for restaurants that are privately owned or owned by restaurant groups, it’s been challenging to find a way to move away from the dominant paradigm without going out of business. This is why many businesses have gone to the flat fee, which is the current band-aid, but not the solution. What Meyer is proposing is far more radical. As we know, even with our structure, it is not easy to remunerate fairly and operate a business. There could be some potential to increase our visibility in town as a vanguard for where the industry IS going, not just as some socialist experiment. I’ve said it before, we decided to this nine and half years ago because it’s the right thing to do. It’s not the easy thing to do, but I still believe it’s the right thing to do, and since when has been doing the easy thing been rewarding or inspired real growth? 

There are a few links to some articles here, but I think this is interesting, and very timely. It’s especially encouraging to see a major restaurant group make this sort of sea change while working in conjunction with ROC and the RAISE Steering Committee. It’s already pretty divisive, and if you are a comment reader, each of these articles have some seriously opinionated comments going on. If your are interested in knowing more about tipped wages, wage gap, or anything else about what ROC or RAISE is doing, feel free to reach out to me:

Other Reading:

Why Pay A Living Wage?

A living wage is defined as the minimum income for an individual or family group necessary to meet basic needs. Living wage standards vary, but all are based to some extent on local housing and food costs. Many also include other needs such as clothing, retirement savings, education; some standards include items such as minimal vacation costs, insurance, professional fees, elder/child care. Most standards are based on a ~40 hour work week for a worker with no additional income. In the U.S., a comprehensive living wage for any particular community is usually several dollars per hour higher than the pitiful federal Minimum Wage: $7.25 (imagine working for an hour, doing just about any kind of work, and after that hour you’ve built up enough income to possibly afford a fully loaded Starbucks beverage). The living wage movement aims to establish for particular localities a more reasonable and equitable minimum wage, and it turns out that doing so is a benefit to all concerned.

For most of U.S. history, the predominant business model and means of profit-taking have relied on state and federal policies which lock workers in predatory low wages. Implicitly or explicitly, we are told that business — and thus our entire economy — can only flourish by keeping wages low so that businesses can grow and be ever more profitable for investors and management. That accumulated wealth will then surely tickle down to the wage earners, at least when management/investors feel so inclined, or more likely when they are compelled to do so by workers and their advocates. Wage advocacy and politics is, however, another one of those areas that broadly fluctuates in waves and depends on the varying efficacy of workers advocacy groups, the tolerance of workers, and sometimes simply the good graces of management and investors. Instilling fear of job loss often plays a role in keeping wages low. In fact, one effect of the federal Minimum Wage is a reminder of “how great you’ve got it making $8.00 or even $7.75 an hour.” Workers’ rights and pay fairness advances by two-steps-forward, one-backwards (sometimes vice versa), but it seems that strides are currently being made.     

The effects of paying workers less than a true living wage are serious and contribute primarily to many of the ills facing U.S. society. A worker paid the minimum wage of $7.25/hour, or any wage below a living wage, cannot possibly afford basic necessities without assistance. This creates problems not only for workers, but for businesses and the local economy. One commentator (Fred Lundgren, a radio talk show host) recently said:   “The sinister trap of permanent poverty level wages is snapping shut on a growing number of Americans each year, causing the middle class to evaporate into poverty before our eyes, while these same Americans get blamed by conservatives and libertarians for falling into the trap.”

Along with the Occupy movement and the related ongoing period of enlightenment following the Great Recession, the idea of paying workers a true living wage and/or a reasonable minimum wage has become part of the daily news. Black Star’s wage policy has been part of that positive publicity since its opening almost 5 years ago. Along with the co-operative idea that distant and idle investors should not profit from local business activities, payment of a living wage is an important element of the democratization of our economy. From day-one, Black Star’s Ends Policies have included the following:

A.4 Black Star Co-op will provide an empowering environment for all workers through worker self-management. Specifically:

A.4.1 Pay a living wage and provide excellent benefits to all workers.

A.4.2 Promote worker retention.

A.4.3 Maintain a hospitable working environment.

A.4.4 Encourage high-quality work from our workers.

Part of Black Star’s success and its ability to keep high quality workers in the Workers Assembly relates directly to our dedication to fair worker pay and treatment. Members and patrons reviewing the service and quality of food and beverage at Black Star consistently praise our workers and rate them highly. WA members similarly rate the working environment at Black Star very highly. Not surprisingly, this seems to be a common result of worker fair treatment in any business. 

Studies have demonstrated the benefits to a business of paying a true living wage, many of which are amply shown at Black Star, such as the following: 

  • Paying a living wage leads to increased worker morale, worker health, and quality of service, as well as lower absenteeism, turnover rates, and recruiting and training costs.
  • According to a Fiscal Policy Institute Study, states with higher minimum wages experience more small business growth, both in number of employees and in number of establishments, than states with lower minimums.
  • Raising wages is affordable — employers are able to absorb the costs of a wage increases through higher worker productivity and lowered administrative and training costs, not to mention the possibility of reducing excessive management costs.
  • Moreover, multiple surveys have shown that most Americans are willing to pay more for living wage produced products and services.

There are also many distinct benefits inuring to the local community from paying a living wage: 

  • Having a living wage work force and related efforts to end poverty and inequity moves all citizens toward a more just, sustainable and engaged local economy.
  • Living wages reduce overall worker inequality by strengthening low-wage workers’ bargaining power in the job market.
  • Living wages enable working people to become self-sufficient and rely less on social services. Today, millions of full-time workers and their families receive food assistance and other forms of charity. Federal and state tax-based assistance for full-time workers is both counterintuitive and counterproductive — only a fraction of every tax dollar allocated to social services directly assists recipients of aid, while 100% of wages do.
  • Wage increases accomplish the above but do not lead to job loss. Repeated studies, usually relating to minimum wage increases, have failed to find any systematic, significant job loss associated with federal/state minimum wage increases. In fact, following most such increases, the low-wage labor market performed better than previously in that unemployment rates dropped, family income increased, poverty rates decreased and workers and their families were generally happier.
  • Living wages generally stimulate the economy through increased consumer spending and the money multiplier effect.
  • Businesses can demonstrate greater corporate social responsibility, and benefit from an increase in public recognition as leaders of the worker fairness movement.

As a co-op and a worker self-managed business, it is part of Black Star’s “DNA” to pay a living wage. The experience at Black Star has shown that this decision has absolutely been positive and broadly beneficial.