As some activist groups continue to seek to undermine the system that allows service workers to earn tips, voters in this election should protect the opportunity to earn tips and ensure that workers are required to do so. They will decide on Proposition 138, which would allow them to continue earning significantly more than the minimum wage.
current law
Current Arizona law allows employers to pay tipped employees up to $3.00 per hour less than the minimum wage, provided the employee’s total earnings, including tips and gratuities, are at least the minimum wage for all hours worked. allowed to pay the amount. Employers can verify this through their own records or through employee filings under the Federal Insurance Contributions Act (FICA).
This ability for employers to pay their employees tips below the hourly minimum wage is known as an employer tip credit.
What does Proposition 138 change?
Proposition 138 would amend the Arizona Constitution to allow employers to pay tipped employees up to 25% less than the minimum wage. However, the employer must demonstrate that the employee earns at least the minimum wage plus an additional $2.00 per hour for all hours worked.
This calculation is based on tips or average tips received and wages paid during the payroll period or other period permitted by state law. Employers would be permitted to use records of paid tips and FICA filings to verify compliance with the proposed amendments.
Why is this being suggested?
Arizona’s current tipped worker credit helps preserve between 6,200 and 13,500 jobs across the state, lowers restaurant and bar prices by about 1%, and contributes up to $1 billion to the state’s annual GDP. I am.
But the value of this credit has declined significantly, from more than 40% of the minimum hourly wage in 2006 to just 21% today, according to the Common Sense Institute. Proposition 138 aims to stabilize credit by pegging the hourly minimum wage at 25% going forward.
Rising labor costs, strict regulations, and other challenges are making it difficult for young people and students to enter the labor market, including the service industry. In 1990, the labor force participation rate among teenagers was over 50%, but today it is approaching 20%.
Some activists are against tipping
Anti-tipping activists across the country and in Arizona are calling for an end to employer tip credits and for current tipped employees to be treated the same as non-tipped employees.
But eliminating the credit would put upward pressure on menu prices as employers look for ways to absorb newly increased labor costs.
Evidence in other jurisdictions where tip credits have been abolished suggests that higher menu prices result in higher menu prices for servers and other This shows that the amount of tips for workers will be lower. However, this is not always the case. That’s because servers will no longer be able to supplement their income in ways that traditionally allowed them to earn far more than minimum wage.
Business community perspective
“The Arizona Chamber of Commerce strongly supports Proposition 138, the Tipped Worker Protection Act. This measure provides a balanced approach to wage management.
“We want to protect the incomes of tipped workers and ensure fair compensation for our workers while supporting the economic health of local businesses,” said Danny Seiden, president and CEO of the Arizona Chamber of Commerce. We will ensure it.”
“The City of Tempe enjoys a vibrant tourism ecosystem that includes a variety of players in the technology, manufacturing, education, hospitality, lodging, food and entertainment industries. “This is critical to the continued success of Tempe, which has a significant dining population of more than 100,000 people who work here, 189,000 who live here, and approximately 63,000 who attend school,” said Colin. . Mr. Diaz is president and CEO of the Tempe Chamber of Commerce.
“Inflation is hitting businesses across Arizona hard. This is especially true for the restaurant industry, which has seen significant layoffs and closures over the past few years.
The Tipped Worker Protection Act helps alleviate this problem by lowering costs for Arizona restaurants while ensuring that restaurant servers continue to earn above the state minimum wage. This will make family meals more affordable and foster job creation in the restaurant industry,” said Victor Riches, president and CEO of the Goldwater Institute. .
