Quick Hit Ellyn Fortino Friday June 12th, 2015, 6:16pm

Report: Low Wages In Full-Service Restaurant Industry Cost Taxpayers $9.4 Billion Annually

Many full-service restaurant industry workers are forced to seek public aid to supplement their low wages and lack of benefits, and that leaves U.S. taxpayers with a $9.4 billion tab each year.

That's according to a recent report by Restaurant Opportunities Centers United (ROC). The restaurant worker advocacy group found that nearly half of the more than 4 million full-service restaurant workers live in households enrolled in at least one public assistance program.

Of that $9.4 billion, $1.4 billion represents the public cost of low-end pay and benefits provided at the country's five largest full-service restaurant companies, which collectively earned $704 million in profits and paid their chief executives $27 million in the last year alone, according to ROC.

Those companies include: Darden (owner of Olive Garden, Longhorn Steakhouse, and Capital Grille), DineEquity (parent company of IHOP and Applebee's), Brinker International (owner of Chili's and Maggiano's Little Italy), Bloomin' Brands (owner of Outback Steakhouse, Carraba's Italian Grill, Bonefish Grill, and Fleming's Prime Steakhouse and Wine Bar) and Cracker Barrel.

The annual public cost of low-wage work at just one Olive Garden location, for example, breaks down to be nearly $197,000.

"The full-service restaurant industry is defined by large iconic brands whose household names generate billions in earnings each year," the report reads. "However, while industry chief executives enjoy abundant compensation packages and shareholders receive generous rewards through dividends and share buybacks, the workers who make these restaurants successful are among the lowest paid in the workforce."

"Finding themselves left out from the rewards generated through their labor, millions of full-service restaurant workers must rely on public assistance in order to meet their basic needs," the report adds.

In the full-service restaurant industry, the median wage in 2014 was $10.58 for cooks, $9.27 for bartenders and $8.98 for the wait staff, according to the report.

Servers and bartenders are among the workers who get a tipped minimum wage, which has been frozen at $2.13 an hour at the federal level for 24 years. 

Under federal law, employers have to pay tipped workers an hourly wage of at least $2.13. Employers can claim a "tip credit" and count workers' income from tips toward the remaining balance of the regular minimum wage.

Restaurant workers in 22 states receive the federal tipped minimum wage of $2.13.

Twenty states plus the District of Columbia have tipped minimum wages greater than $2.13 an hour. In Illinois, the base hourly wage for tipped employees is $4.95, while the regular minimum wage is $8.25.

The other eight states provide "equal treatment" to tipped workers, meaning the tipped wage floor is the same as the regular minimum wage.

Essentially, the full-service restaurant industry is getting subsidized twice by the public. Taxpayers pick up part of the employer-wage bill in states with tipped minimum wages less than the regular minimum wage, and they also cover public assistance costs for low-wage restaurant workers.

Among other findings, the report showed that tipped workers have a poverty rate of 21 percent, more than two times the rate of the overall workforce.

"It's clear that one of the most effective ways to help restaurant workers is to ensure that women, who make up the majority of tipped workers, are not living table-to-table off tips and instead are guaranteed the dignity of a fair and stable wage paid to them directly by their employer," ROC spokeswoman Maria Myotte told Progress Illinois. "There are already (eight) states, including the entire West Coast, that have abolished the separate, lower wage for tipped workers. All of them have thriving restaurant industries and vastly lower poverty rates among restaurant workers than states with a subminimum wage."

ROC and allied groups are working nationally and in various states to advance their "One Fair Wage" campaign, which seeks "to eliminate the two-tiered wage system and establish one fair minimum wage for all workers," Myotte said.

In its report, ROC takes particular aim at the "leading force" against the goals of the "One Fair Wage" campaign -- the National Restaurant Association (NRA).

"The legislative priorities of full-service restaurant companies and their industry trade group, the National Restaurant Association, center on protecting an unfair system that allows certain employers to pay workers subminimum wages and targeting other worker-friendly policies such as paid sick leave and fair scheduling laws," the report says.

In a statement to Progress Illinois, the NRA fired back at ROC, slamming the group for its "recycled attacks" on the industry.

"The restaurant industry provides real pathways to the middle class and beyond," said NRA spokeswoman Christin Fernandez. "ROC's recycled attacks are part of a national, multi-million dollar campaign engineered, organized and funded by national labor unions and their allies seeking to disparage an industry that has no barrier to entry and no limit to what people can achieve."

The NRA also takes issue with the phrase "subminimum wage."

"Despite ROC's attempt to blurry the truth, there is no subminimum wage," Fernandez stressed. "Under the Fair Labor Standards Act tipped workers receive the federal minimum wage or higher as depending on the state wage requirements. Restaurant servers are among the highest-paid employees in the establishment, regularly earning between $16 and $22 an hour."


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