Tips at heart of N.H. minimum wage debate

With an increase in the state minimum wage apparently a foregone conclusion, the real issue is what happens to workers whose wages are mostly based on tips.

House Bill 514 – introduced by Rep. Marjorie Smith, D-Durham, who chairs the powerful House Finance Committee – would increase the minimum wage for all workers from $5.15 to $7.25 an hour over a two-year period, the same as proposed federal legislation.

But while the federal bill freezes tipped workers at $2.13 an hour – with the idea that the tips they collect more than make up the difference — the state bill would change the current tipped worker minimum from $2.38 an hour to 45 percent of the state minimum, or $3.26 an hour – an 88 cents-per-hour increase over two years.

While that doesn’t sound like a lot, it does add up, says Chris McDonough, owner of five restaurants around the state, including Fratello’s in Manchester and The Homestead restaurants – where more than a third of his 300-plus employees receive tips. He says it would cost $50,000 a year to cover the increase.

McDonough and other members of the New Hampshire Lodging and Restaurant Association say it isn’t so much the amount, but the unfairness of it all. The tipped workers end up taking home more than those in the back room, sometimes $10 or $15 an hour. They are the ones who will actually get a raise, while the backroom worker already making more than $7.25 an hour won’t get a penny. Indeed, they might actually see a reduction in benefits, or even wages, he said.

“When you increase the tip wage to highly compensated workers, that negatively affects operating expenses,” said McDonough. “It takes away money that could be used for benefits. It will affect our ability to compensate the entry-level employee who needs that compensation the most.”

But advocates of the bill don’t buy that argument. First, they say, the amount involved is minuscule compared to the company’s bottom line.

“To threaten to take the difference out on the people in the back is not appropriate,” said Martha Yager, economic justice coordinator for the American Friends Service Committee of New Hampshire. “What happens when your other costs go up, like the cost of energy or beef? You don’t cut benefits, you bump your prices up. They have to figure this out without taking it out of somebody’s hide.”

Second, Yager argues, those in the back room might benefit from the bill as well. While the median range in New Hampshire for food preparation workers is $8.23 an hour, the average entry-level worker is paid $6.31, some 94 cents below the projected minimum, according to Yager. The figures include fast food workers.

All this has some of the bill’s sponsors thinking. Smith could not be reached for comment, but co-sponsor Ed Butler, a North Country innkeeper and freshman Democrat – can see both sides of the issue.

“It’s a good argument,” he said of the industry position, “But labor is not excited about changing it, and they have some good logical arguments as well. I haven’t made up my mind yet, but the issue of tipped wages is going to be the primary issue of this bill.” – BOB SANDERS