The Matters that Massachusetts Restaurant Association Wages for (and against) with Stephen Clark

Restaurant work is undeniably tough. Long hours, fierce competition, and thin profit margins characterize this demanding profession. The challenges only intensified during the COVID-19 pandemic, testing the resilience of workers and business owners alike.  Dining constitutes both an undeniable pleasure and a thriving business sector. It is integral to our lives and livelihood.

In this Distinguished podcast, Stephen Clark, President and CEO of the Massachusetts Restaurant Association (MRA), joins us to explore the ballot question to eliminate the tip credit and mandate tip sharing.

Get a look behind the kitchen door at this dynamic industry. If you are passionate about restaurants, gather around for this podcast!

The “Distinguished” podcast is produced by Boston University School of Hospitality Administration.

Host: Arun Upneja, Dean
Producer: Mara Littman, Director of Corporate and Public Relations
Sound Engineer and Editor: Andrew Hallock
Graphic Design: Rachel Hamlin, Marketing Manager

Music: “Airport Lounge" Kevin MacLeod (incompetech.com)
Licensed under Creative Commons: By Attribution 4.0 License
http://creativecommons.org/licenses/by/4.0

Transcript

Arun: As Dean of the Boston University School of Hospitality Administration, we are interested in the topic of wages and compensation in the service industry, and we'll be presenting various vantage points. In this podcast, the organization One Fair Wage, proponents of the minimum wage for all tipped employees, is named by its opponents as California activists, which conveys a political stance. As an academic institution, we provide the platform but do not take a stance on the issue. 

Now, I welcome you to listen to the podcast and form your own opinion. 

Welcome to the Distinguished podcast, where we delve into the heart of the restaurant industry, an integral part of our lives. Dining out not only nourishes our bodies but also provides an experience that feeds our souls. Yet, behind the scenes, restaurant work is undeniably tough. Long hours, fierce competition, and thin profit margins characterize this demanding profession. The challenge is only intensified during the COVID-19 pandemic, testing the resilience of workers and business owners alike. Today, we are privileged to have Stephen Clark, President and CEO of the Massachusetts Restaurant Association, joining us to explore the future of this dynamic industry. The MRA is an advocate for food and beverage providers, offering essential support through education, cost-saving programs, networking, and government advocacy. I'm your host, Arun Upneja, Dean of the BU School of Hospitality Administration. Thank you for tuning in as we navigate the evolving landscape of restaurants and hospitality. And Steve, welcome to our school and the Distinguished podcast.

Stephen: Dean, thank you very much for having me. It's exciting to be here in your beautiful podcast studio, right here on campus at BU. Really excited to get into our conversation today.

Arun: Thank you. So let's start with the role of restaurants in our society. So today, you can order food from an app and have it delivered in very little time to almost anywhere. Work, home, or even an outdoor setting such as a beach or a park. We have seen the rise of star chefs and restaurants with theatrics designed to rival a Broadway show. How do you explain the expansion of dining options in our society? And why do we love to eat out so much? Is it for entertainment value? Is it need for community? Are we just lazy? What is that the reason that as a society, we are spending more money on food than ever before?

Stephen: So that's a great question. And it's probably all of the above. You know, there are different segments of the industry that attract different people at all times. I think just in terms of how quick we are, how busy we are in our life, the ability to go out and acquire a good quality meal at any opportunity is entirely necessary. So, for example, last night, I have a 13-year-old son, I have an 11-year-old daughter, son had a baseball game and then CCD after his daughter had the cross practice. It was seven o'clock. You know, we hadn't fed anyone yet. They hadn't been home from school. It was a lot easier to walk down to the local restaurant, grab something to go than it would be to actually go home, plan a menu, put out a plate, clean up after ourselves. And also the stuff at our house isn't that good. I mean, I was able to get a well-made barbecue pork sandwich. I don't have pork at my house. I don't have time to smoke it. I don't have barbecue sauce. So all of those things that are available that quickly and inherently, so that's one, you know, just we're so busy as a society.

Two, we have an innate desire as humans to interact with other people. And what other place to interact with other people than when we're enjoying a shared experience such as food or a nice cocktail at a restaurant or other industry establishments. So we're the only species that has that ability. And I think we inherently want to do that. And more and more of the things that we do are internal. You know, we do all of our shopping on our phone. We have our groceries delivered to us. We're doing our shopping on Amazon, you know, all these different things, all these different human experiences that we don't have anymore. The only one that we truly do have is dining out and enjoying each other's company. So I think that's why we're spending so much of our of our food dollar away from home. But it's a combination of the need to feel a part of something bigger, the convenience of it and the high quality of it. You know, it's a lot better. Anything I was going to make in my kitchen yesterday was going to pale in comparison to what we ordered. And that ended up being true.

Arun: Well said. And as the president of MRA, I did not expect you to latch on to the laziness argument.

Stephen: Well, there is something to be said for I can type in cheeseburger on my phone, and I have 37 options and a cheeseburger gets delivered to me. So there is something inherent about being able to do that that we didn't have even five, six, seven years ago, never mind 20 years ago. So there is a segment of the population that may embrace the laziness side of things, too, where the food gets delivered to them as well.

Arun: Okay, so now let's talk about a huge, big event that happened, a very dramatic event in our society, which is COVID. It highlighted the essential nature of restaurants in our society. You know, it showed us how important restaurants are to us as, like you just said, as a community. You know, we crave company of people and so forth. But it also highlighted some cracks that are hidden below the surface. You know, the need to increase wages and benefits, for example. The emotional labor and psychological stress of restaurant work, long hours, slim profit margins, customer behavior that, you know, sometimes it's very good and sometimes it's very bad, rude and inappropriate behavior. So, what are some of the lessons, at least some of the good lessons that came out of this, out of COVID and out of this enlightened reflection on what it takes to run a restaurant?

Stephen: So, March 16th, 2020 is one of the darkest days in our industry. We laid off about 85% of our entire workforce overnight. I recall, you know, our offices out in Westboro, Massachusetts, geared up for St. Patrick's Day. I went into a restaurant to bring some corned beef home. Again, not ordering food at home. I mean, not preparing food at home, but ordering it. And I went into the restaurant and the Irish music was playing. It was well decorated. There was shamrocks everywhere and there was not a person in the restaurant. There was one person working there to facilitate some to-go orders. That was the darkest day. We'll never get past that, but it certainly has had a long-lasting impact on the restaurant industry. A number of changes have come out of the industry at a number of different levels. The first one is in terms of positive developments. We taught people how to get delivery and how to eat at home. That hasn't gone away. We've actually seen delivery and takeout increase in most restaurants. And that has led to changing over of restaurant landscape, of reformatting the kitchen or reformatting parts of the dining room to facilitate more dining and takeout options in doing that.

The second one, and this is local to Massachusetts, but it's important, is outdoor dining. If you think about the number of people that dine outdoors now, we used to, you know, April, it was still cold there, October. Now we have people that will put a sweater on, they'll build a fire and they'll eat in those kind of shoulder seasons. And there was very finite opportunities in terms of outdoor dining available. And now that's actually part of the ambiance, and most people are incorporating that into their restaurant footprint. In terms of wages and benefits for employees, as I said, we laid off almost our entirety of our workforce and people started to look in other places for jobs. Four years later, it seems that people are starting to come back and the job shortages are less than they were. But owners and operators are kind of rethinking their benefits package. At the MRA, we're happy to offer, we offer a 401k program for any restaurateur can join and offer to their employees.

And you start to think about more and more benefits that you can offer to your employees to make them want to grow in the restaurant industry. Many times people will stop by, grab a part-time job, leave on their way to another job. But how do you start to think about a job in the restaurant industry as a career? More professionalization, more opportunities for growth, 401k benefits, health insurance, all those things now are pretty standard in the restaurant and we're getting there. So those are some of the evolutions that we've seen with employees and just the commitment to growth in the industry.

Arun: So let me latch on to one thing that you mentioned here, which is the growth of the takeout. We are taking out so much more. One of the issues, one of the expenses of running a restaurant is the space that you have, the rent that you're paying on the space, the ambiance that you've created through the furniture, through furnishings, through pictures and all of that. And then the labor that is involved in providing the service. Yet, when I go to takeout food, I'm paying the same price as if I am sitting inside and dining and consuming all of these. So that has always, to some extent, bothered me that takeout pricing is not significantly different than in how, you know, you're dining in the restaurant.

Stephen: That's an interesting question, an interesting conversation to explore. So, you know, the insurance for being in that building and the cost to be inside that building hasn't changed. And the person who's preparing that—let's use a cheeseburger—the person who's preparing that cheeseburger inside the restaurant is still being paid the same rate. You know, so a lot of the built-in costs to produce that cheeseburger for consumption is still happening. Now you have to build in packaging to take it away. You have to build in the marketing of that cheeseburger. It's a lot different if you're ordering off of a menu sitting in the restaurant. Now you're also—you're not adding anything else to it. You're not having a couple of drinks. You're not adding a dessert. You're not adding an appetizer. So all of a sudden, you know, the overall cost to produce that meal is probably pretty similar.

So, you know, I would think that that's probably why you're not seeing a huge price discrepancy. You know, truthfully, I think that—and we talk about third-party delivery companies a little bit— is that the consumer ultimately is going to need to pay more for that experience. Because not only are we paying for all of the cost to go in to make that cheeseburger for the consumer, but now we're going to pay somebody to get in their car or get on their bike and drive it one mile, two mile, three mile, five miles away. You know, the cost structure is not really there to make it worthwhile. You know, it's not profitable for the delivery company. It's not profitable for the restaurant. So the consumer is ultimately going to have to pay more for that experience to make that happen. And so I actually think the delivery price should be more if you factor in all— especially if you're utilizing third-party delivery. But if consumers want that convenience, they absolutely are going to have to pay for it. And that's where I see the industry heading, especially in the third-party delivery world.

Arun: Right. I was actually more talking about pickup. So not just delivery, but I go to pickup and I'm not sitting there consuming all of that. So let's dive deeply into one of the outcomes of COVID, which is the proliferation of tipping. Now, everywhere there is a nudge to tip. Even in, you know, there are some federally regulated professions where, you know, subminimum wage is allowed where everyone does expect a tip to happen in the federal government. But here, now, even in all kinds of situations, there is, we are being nudge to tip. And so I think that a lot of people seem to be hitting a tipping fatigue. What do you think?

Stephen: Absolutely. I have it myself. I was at a, not a restaurant, it was a different type of place in Boston, and I bought a diet Pepsi. And this person flipped around the screen and said, you know, what's the gratuity going to be? And it's not $1, $2, $3. It's 15%, 20%, 25%. So I think in certain instances where every single transaction you're making, you're getting asked to make a gratuity. And it's not easy to change the number, you know, even if you make it zero or if you want to do a custom amount, you know, you're not necessarily going to leave a percentage of the transaction. I think that's something that we have to work through. I think one of the direct causes of that though is the paying with the credit card. And the credit card transaction makes it more expensive for the operator because credit card fees are what they are. So, you know, one way around that is paying cash.

You pay cash, you don't have to deal with the question. I think we also have to get more comfortable pressing the no button if it's not a job that was worthwhile of a tip. Now, if you're picking up a sandwich or someone makes a sub or a salad for you, traditionally that wasn't tip, but you want to leave them a couple of dollars because they did a great job?

Sure, absolutely. The full evolution of tipping in the non-full service restaurant world is really fascinating. Probably you can probably do a podcast on it just by itself. But historically, it used to be just leaving the change in the cup because you didn't want to carry the change around. So you bought a coffee at the local coffee shop. You had a couple cents back and you dropped it in the cup. That has evolved into this full on new economy of itself in terms of tip for every job being provided. I think we just continue to adjust to that and learn with it. When no one's forced to do it, if you feel uncomfortable, if you don't feel like it was worthwhile, hit the no button. Hit zero. But it's definitely a fascinating conversation as we talk about tips outside of the full service industry. Obviously, tip your bartenders, tip your servers. They're working hard. They're providing a great experience for you. But if you buy a to-go item at the airport, you probably don't need to leave a gratuity for that transaction.

Arun: So here you have it from the president of MRA outside of the full service restaurant industry. Feel comfortable to hit the no button.

Stephen: Just don't call me when that person makes a dirty face at you.

Arun: That sounds very good. Okay, so let's move on to kitchen fees that are often added to checks to raise the wages for the kitchen staff. And the Biden administration is leading a crackdown on what is called junk fees or misleading consumer-facing surcharges that are usually included in the fine print before a purchase is made, or you're surprised by it and it shows up. So what is the MRA's stance on the issue of kitchen fees and price transparency?

Stephen: So I think the Biden administration is making a mistake by blurring all of these issues into one. So we're talking about, you know, Ticketmaster, where or an airline. You know, if you go to Ticketmaster and you want to buy a ticket, I won't call out, again, it's arena, we'll go down the street to a different arena. But you're going to go to, and the baseline ticket is $35 and you buy the ticket and you hit 35. And then it's a 10% service charge and then there's an arena fee and then there's the COVID fee. And then there's all these fees built into it, at the end of the thing, your $35 ticket costs $89. You know, I think that's what they're actually trying to go after. Same with an airline. You go to an airline website, it's $250 to fly from point A to point B, and then it's bag fee, service fee, et cetera, and you're up to $350. That's probably where most of the targeted enforcement should go. I think a kitchen fee, in most cases in the restaurant industry, is pretty well disclosed. Either it's on the menu, or if it's on a sign that says, your transaction is subject to 3% kitchen fee, this doesn't represent a tip or service charge for tipped employees, it's going to the back of the house.

I would like to see, and we've been advocating with the National Restaurant Association on that regulation and legislation to separate those issues. There's a huge difference between an online transaction with a ticketmaster or an airline versus mandatory gratuity for parties of seven or more or 3% kitchen fee. Then you get into the restaurant, and so we talked a little bit about third party deliveries. The third party delivery fee is different, it costs a lot more to deliver one hamburger than it does 12, and the cost structure is going to be different. If you're ordering that product through that site, how can you get a direct price right on the original marking because you're still building your order? I think most restaurants would be willing, would comply and would disclose most of those fees that are there anyway.

In practicality, I don't think it's going to be a huge impact because as I understand it, as long as all the fees are disclosed upfront, you're fine. But let's take it outside the restaurant industry. If you go to a catering function and there's a cake cutting fee, or there's the wine re-corking fee, there's a whole number of fees that aren't necessarily on your advertisement of how much you're going to pay, the DJ fee. So if you think about different fees that need to be added on and are part of the transaction, I don't think the consumer wants that, needs that price right away. I think that there needs to be open dial. Not everything is cut and dry. Not everything is paint by number, where this is what the number is. I assume the all-in fee to come to BU. Maybe there's a couple of different line items on there, right? It's not all the top.

Arun: Like you said, we leave that to a different podcast. But I do want to get into one thing that you just said in here, that the cost to deliver 12 hamburgers to one location would be different than delivering a single. I'm not sure why that would be accurate. I mean, you're taking one box, whether it's at one hamburger or 12 hamburgers, it's the same, traveling the same distance, same. So I think to some extent that I'm not sure I fully understand.

Stephen: Yeah, I think that's more of a third-party delivery fee issue with working out how much it's going to be to get one thing to, you know, if it's 10 hamburgers, maybe it can't be the guy on the bike that has to drive it, and it has to be the car that has to drive it down the road. So there are some factors that aren't fully determined until the final order is decided. So that would be my thought process on that.

Arun: No, so I understand that also it's outside your...

Stephen: That's outside our world, yeah.

Arun: But let's go back to the kitchen fees, which is, are most restaurants, when they have this kitchen fee, are they actually passing it on to the kitchen employees?

Stephen: I hope so, especially the ones that market that they are. If you're saying that you're going to... And what's the root of the kitchen fee? Why do we have the kitchen fee? There's a huge discrepancy, and I think we'll get into this later, there's a huge discrepancy in a restaurant between front-of-the-house employees and back-of-the-house employees, and the front-of-the-house employees make more money, and that's inherently true. No matter whether it's a breakfast place or a fine dining establishment, front-of-the-house are making more than back-of-the-house. The kitchen fee is really just the end around raising the overall price, because if you raise the overall price, people tip more. People tip on the end price, and so that number always goes up. So any time menu inflation averages, it's probably a little higher the last couple years, but averages three to five percent every year. That means people are leaving three to five percent more in tips every year, by and large. The kitchen fee is really just the end around putting that price onto the dinner and diverting it to the back of the house. I think most operators that are promoting that they're trying to direct three percent to the kitchen staff, they are doing that and they are truthful in their marketing of that.

Arun: But from a consumer perspective, if I'm paying 20 percent as a tip, as a gratuity, but then now I'm having to pay another three percent, so should I think that okay, now I need to only tip 17 percent?

Stephen: So no. So interestingly enough, some studies have shown that people actually tip more, because inevitably they just tip on, they don't want to do the math. So they just tip the 20 percent. So by and large, the tip goes up. So again, it kind of contradicts what the ultimate intention is. Some people do tip less. The people that are actually carrying the decimal and removing the tax and removing all those things, might the tip go down? Sure. But I think by and large it ends up being pretty cost neutral from the consumer perspective.

Arun: So let me just ask you, in Massachusetts, are you passing on the entire tip to the employees or are you subtracting the credit card fees that you're paying?

Stephen: So in Massachusetts, we're prohibited from doing that. So the gratuities 100% belong to the employees. Outside of a valid tip pool, with other service employees, the tips have to go to the employee. They 100% belong to the employee. So if anyone is out there doing that, please stop that. That is a violation of the wage statute. So all tips do belong to the tipped employee.

Arun: So greater the tip, greater the credit card commission that you're paying, and the workers are obviously getting that entire number.

Stephen: Yeah, I mean credit cards itself is a fascinating conversation. It's something we've spent a lot of time on. So if you're in a typical restaurant operation, let's use 20% as the round number for the gratuity. Let's use 7% as the round number for taxes. That's 27% of every restaurant transaction that you are now paying a credit card fee on. That is putting $0 to the bottom line. There's no other industry that has that type of impact on credit card fees. And that's probably the biggest issue we hear from operators around the Commonwealth is, what are we doing about these credit card fees? And if you think about it, we will all go home today and we'll have a credit card offer in our mailbox that said we've been pre-approved and we're going to get 6% cash back on restaurant transactions, et cetera.

I think we really need to have that conversation as a society is, where are those rewards points coming from? They're coming from the actual cost you're paying to swipe that credit card every single time. And there's a real impact on the unbanked consumer. The unbanked consumer who's paying cash is now paying more for that restaurant experience because of those rewards points. And so there's a lengthy conversation happening nationally. There's some legislation happening in Massachusetts around those conversations. But credit card fees is truly one of those conversations that the cost keeps going up. And never mind, there's a story in the paper this morning, or I think it was yesterday, you know, the charge back. The restaurant basically doesn't have a leg to stand on when the consumer challenges their credit card.

And so it's really a lopsided conversation right now between the credit card companies. They have all the advantage. And, you know, that's why I made the joke about cash, you know, avoiding the tip question with cash. But, you know, we've had a lot of different issues come up with credit card processing and the overall cost of doing it. It's probably the highest line item in a restaurant right now outside of food and labor is credit card costs. And so that makes everything more expensive. But again, in a restaurant industry, 27% at a minimum of all your transactions are subject to credit card fees and you're not making any money on that amount.

Arun: So two things, two questions here. One is, on one side, have you negotiated with the credit card companies to say, hey, don't charge us on this because this is going straight to the employees. And this, you know, we are now more they get the tips, the more expense we are paying to you guys. So has there been any discussion on that?

Stephen: There's been conversations nationally, especially, but you know, there's very few credit card companies and very few credit card processes that are out there. It's hard to get Visa and MasterCard on the phone when they're out there. But they have, it's a conversation that absolutely needs to happen. And I think that society is becoming more aware of the hidden costs of processing credit cards, et cetera. So, you know, I'm optimistic that we'll continue to kind of break up the duopoly that those credit card companies have.

Arun: On the flip side, what about legislation in the legislature to sort of allow you to subtract out the, just the cost of the credit card fees when you're giving to the, you know, handing the tips back to the employees?

Stephen: Yeah, absolutely. So there's been a couple of different legislative proposals that have kicked around. One of them is a vendor credit for the privilege of collecting and remitting meals tax to a restaurant and to the state. You know, Massachusetts restaurants collect about a billion and a half dollars in meals tax every year, not including the local option meals tax that's on there. So 3% of that is a pretty significant amount of money. There has been legislation pending for a long time at the state house to give a vendor tax credit for anyone who's actually collecting that money to put toward those credit card fees. Thus far, there hasn't been much momentum. You know, the state doesn't give up revenue too frequently, and I don't know what the cost would be on that vendor tax credit, but there have been conversations around that, and there's also been conversations on when you collect your meals tax and then you pay it to the state, you're now paying a with credit card fee on that as well. So you're paying it when it comes in and when it goes out, so it's costly.

Arun: Okay, so hiring and retaining the restaurant workforce has been a real challenge. And you said slowly after the COVID, people are coming back, but at some point we did lose a whole lot of workers to other industries. Wages and benefits have increased. Like you said, you're offering 401Ks. You're offering signing bonuses and other incentive to recruit employees. The one fair wage which advocates for minimum wage with tips on top has gained momentum. MRA obviously opposes the ballot proposal that would eliminate tip credit and mandate sharing of tips. So what are your arguments against this proposal, which is elimination of the subminimum wage?

Stephen: So thank you for that question. And one correction is there's no subminimum wage. The Massachusetts law and the federal law requires minimum wage to be paid. And in Massachusetts, it requires a minimum wage to be paid for every shift that gets worked. So the word subminimum wage does not apply. There are subminimum wages in other industries, agricultural, farming, et cetera, and that is a true minimum wage below the state wage. So it's a little bit of it's linguistics, but it's important. There's no subminimum wage. Every employee is guaranteed minimum wage. Why are we opposed to the question? It's simple. The servers don't want it. The tipped employees that are earning tipped income, as we've talked about, are the highest paid employees in the industry. They don't want this change at all. They are making $30, $40, $50 an hour in very limited hours of working.  It's mostly a part-time job. It's an opportunity for working mothers and students and people that need a second job to put food on the table to get a pretty high lucrative per hour job. First of all, they don't want it, and they don't want to share their tips with back-of-the-house employees that aren't generating tips.

Second, California, which has no tip credit, is the lowest tipped percentage in the state. I'm sorry, the lowest tipped percentage in the country. They have the lowest tipped workers. Massachusetts tipped employees make $3 per hour more than their California counterparts. It's a bit of a misnomer. It's more like one flat wage where everybody will make the same amount of money, and the servers and bartenders don't want it. That's why we're opposed to the question. I would push back a little bit, and again, semantics. You say gaining momentum. I say California activists trying to spend some money to bring a ballot question, because this proposal has been filed for 10 years in the legislature, and it hasn't gone anywhere. This is a multi-state campaign where they're spending millions of dollars to go into different states and try to change that, but I would push back that it's gaining momentum. I think it's just getting attention because it exists, but I think by and large most people don't want it.

Arun: Interesting. Then the follow-up question is, in Massachusetts, you also are not allowed to pool tips with back-of-the-house employees, and presumably that's because the tipped employees are making up part of their minimum wage through the tips that they're getting. So with this proposal, if everyone is being paid the minimum wage from the restaurant, then you are then, in that case, allowed to pool tips between the front and the back.

Stephen: Well, under the language filed on the ballot question, in theory, that's what the intent is. There are some conflict issues with existing tip law and the language that has been filed. I believe that is the intent of what they want to do. Unfortunately, we can't separate the two questions out. Right now, it's eliminated the tip wage and permit tips. That's two different questions, really. And when you go to the ballot, you're supposed to be able to vote yes or no on one question. Voters are not legislators. They don't have the ability to bisect different questions. Hopefully, the SJC will weigh in on that question. That is a conversation that should be happening in the restaurant industry about where we want to share with tips. But if you think about it, tip sharing is micromanaged at the government level. This is where you could go. If we were building the tip law, and I'm removing tip credit for right now. That's an important discussion to have.

But this is just on tip sharing. If we were building a tip sharing law from scratch, I think, and I think a lot of people would agree, that when an employee comes to the restaurant and applies for a job, the employer says to them, this is what happens with the tips in the restaurant. Either they are kept here, they are pooled with employee A, B, and C, or they're pooled with employee A, B, C, D, and E. And this is what it's going to be. And you as the individual employee should have the right to choose to work in that environment, or go to a different environment where it has a less strict or more strict pool. It's, you know, the tip pool law is very almost looks like it's a contractual agreement that it can go here, it can't go here, it can't go there.

And that's what I think the tip law should be. I think workers should be able to choose the established, I'm sorry, the employer should be able to choose where everything goes. But when full disclosure, notice to the employee, this is how we do it. You can work here or you cannot work here. It's the same way if you applied for a job at one university and they have X, Y, and Z, and you went to a different university and they have A, B, and C, you're choosing where to go. I mean, that's what the ultimate, what a new tip law should look like. But again, I don't think that's going to happen anytime soon. That's more aspirational tip law.

Arun: Yeah, we have to live with the laws that we have and laws that are being proposed. So let's go back to this to being in a way you said, waiters and servers and bartenders are making much more than the minimum wage, and so they are not interested in this proposal. But that applies to restaurants where the average check per customer is high. What about the smaller diners? What about diners outside the city, which are very different from the big box? Well-financed restaurants are very high-check restaurants. Do you think the increase of the minimum wage could benefit some of the employees, the front-of-the-house employees in those restaurants?

Stephen: So no, because those employees are still making more than minimum wage. And so yes, there's the fine dining experience in Boston, but it's the breakfast shop in Hopkinson, Massachusetts. You're still making more than minimum wage. Maybe you're making $21. We did a survey of servers across Massachusetts, and 91% said that the current system works for them. But more importantly, 60% said they make more than $30 per hour, and 91% said they make more than $21 per hour. So in a state with a $15 minimum wage, you're still making more money. The business model is different. If you go out to breakfast on a Sunday, you turn those tables over quickly, and the tips add up versus a fine dining experience.

You're probably sitting there for two hours. You're ordering a dessert. You're ordering a wine, and the tip accrues from the time that you're there. But the model is different. At a breakfast place, it's turned people over quickly. You're still getting to the average hourly rate that exceeds minimum wage. So it doesn't matter what level of the scale. You're still making more than minimum wage. And so I think most servers are good with the system the way it is.

Arun: A few minutes ago, you said that you were talking about the back of the house, and we were talking about pooling with the back of the house. So what is the MRA's perspective on pooling with back of the house? I know right now it's not allowed in Massachusetts, but let's say we can wave a magic wand and say it's allowed. What is MRA's position on should employers do this, or is it you're going to say let each restaurant decide by itself?

Stephen: So if the magic wand has authorized it, then each restaurant is going to decide what makes sense for them. At the end of the day, the restaurant needs to be able to open its doors, needs to be able to meet a business model that allows it to stay open. And if that model is allowing more tip sharing, then sure. Unfortunately, the magic wand tied to this question, we can't extrapolate it out. They're both linked, inherently linked. So, sure, magic wand, utopian society. I think some restaurants would choose to share tips with everyone. I think some restaurants would choose to not share tips. And I think that that choice is good. It shouldn't really be governed to that. But yes, in a magic wand society, yes, I think restaurants would share more if they could.

Arun: So, you did mention some friends of the house staff are making $30, $40, even $50. But I'm assuming that most restaurants are not paying $50 to the back of the house staff. If there is tip sharing allowed, then back of the house staff get an increase in their wages. And they take home pay that they have. Wouldn't that help in attracting back of the house staff? Right now, I think all restaurants are suffering from not having back of the house staff.

Stephen: So, you're assuming that the financial decisions are made in a vacuum, that back of the house staff, that tipping won't go down, that price increases won't happen, that there won't be service fees and all these things that happen. So, if we could share tips with the back of the house, what's to say the back of the house base wage wouldn't be lowered? Why wouldn't if you could pay X and get Y tips? And then if it's a quiet weekend, you've now made less. So, we're only assuming that the price is going to go up in that vacuum, but I think that's the false premise of the activists from California, is that it's really one flat wage. They want everybody to make the same amount of money. And if there's somebody that was really good, they get paid the same amount. If there's somebody that was lacking and not as good, they're going to get paid the same. I think that's ultimately what they're trying to get to, is everyone gets paid the same amount.

And I don't think that's the way that our society works. There are people that make more money, that are better at their job. There are people that make less money, that are not as skilled at their job, and don't have as much experience. So that's an assumption that everything is just going to go up. But I think that that's not necessarily going to happen. That could lower back-of-the-house wages as well if it becomes one flat wage. 

Arun: Some people argue that tipping incentivizes workers to provide better service. But some servers say that tipping culture has attributed to servers being subjected to sexual harassment, racism, verbal and emotional abuse, among many other problems of mistreatment and inequities. There is no doubt that tipping is ingrained in the American culture. So how can tipping engender both good service and fair treatment?

Stephen: So a couple things. No one should ever be subject to sexual harassment in their job ever. Unfortunately, sexual harassment is in our society. It happens in newsrooms, it happens in college campuses, it happens at the state house, it happens in law firms, it happens unfortunately everywhere. There's no tipping in any of those industries. And to link the two is, unfortunately, when an agenda is being pushed, reality takes a back seat. And according to the Employment Equal Opportunity Commission, states that have no tip credit and states that have a tip credit have the same level of sexual harassment. And again, sexual harassment at any level is inexcusable. And occasionally, owners have to fire employees that violate that trust. They have to fire guests that violate that trust and say, you're not welcome here. But to drive that agenda that it is linked, I've talked to many employees in the industry, and they disagree that that's not the case. And so I think tipping does incentivize good service and allows people to earn a very lucrative per hour wage. But there's problems in society at every level in every workforce, and there's many that don't have tipping. So to link them inherently, I think, is more agenda pushing than is based in fact.

Arun: So many times now I've brought up the one fair wage and these proposals, and you've talked about them as well. I wonder if, you know, obviously everyone's positions are pretty well sticked out and everyone is, you know, a lot of discussion is happening in the media and articles and news reports and so forth. I wonder if people would sit around a table without the glare of the media and have a discussion to find out, okay, what's broken, what needs to be fixed, and what is working fine and what doesn't need to be fixed. You think some progress can be made in terms of what the sides trying to appreciate each other's position?

Stephen: Who knows? This has been a conversation that's been ongoing for 10, 15 years. I think that I don't know what the ultimate end game is for the activists from California. They're spending a lot of money in a lot of states. They're not all altruistic. Why are they doing this? Why ultimately, why are they coming to this? Is it because there's a greater demand to maybe unionize operations? I've heard people say that, well, you can't collect union dues from tips. What is the broader ask? What are they ultimately trying to accomplish by spending all of this money? We know what our role is. Our role is to protect the restaurant industry, to grow and advance the restaurant industry.

It's unclear what their long-term goal is, but to go around to different states to spend millions of dollars to try to change this law, it's not altruistic. At the end of the day, what is trying to be accomplished? Until their goals long-term are established, I don't think there can be meaningful conversation. You say outside the glare and the lights, a lot of times the glare and the lights come with the circus that is there. I don't know if there's an opportunity to have those conversations. I hope there is eventually at some point, but where things are right now and how much money is being spent, I don't think that there's an opportunity for that right now.

Arun: Interestingly, in a couple of weeks, Saru Jayaraman will be sitting in the same seat that you're sitting and I'll be happy to ask her the question that you posed to her. So at the end, we want to conclude this podcast with a slightly different turn of events, a little bit more fun, quick fire round of questions. How many times per week do you go out to eat? I think I've already heard you eat out a lot.

Stephen: I mean, it's at least seven or eight. If we factor in more, yeah, I'll stay with seven or eight for right now. That's a good healthy number once a day, right?

Arun: Once a day, yeah. That's a good answer for the president of MRA to give out as well. When you visit a new city, are you more excited about visiting casual eateries or fine dining establishments?

Stephen: Definitely casual eateries. Give me five places I can go to with a cocktail and an app, and I can work my way through and see different people, different menus, different high-quality cocktails. Give me multiple places in a couple hours versus one long dinner.

Arun: In your own kitchen, which job do you choose? Planning the menu, setting the table, creating the ambiance, cooking the meal or cleaning the dishes?

Stephen: I think it's more of where you want to order from tonight. Probably planning the menu and cleaning the dishes. My wife and I have a good partnership and we really kind of split the duties pretty evenly.

Arun: And being a good leader of MRA. Thank you, Steve, for delivering a guest lecture at our school and coming here for the podcast. It's been a pleasure to have you for the Distinguished podcast.

Stephen: Thank you for having me on. This has been great. I really appreciate it. I'm looking forward for more ways that the MRA and the BU School of Hospitality can interact and find some commonplace to advance the industry.

Arun: Thank you. And thank you all for listening today to our Distinguished podcast. If you like what you're hearing, be sure to follow up and give us a five-star rating. If you want to join the conversation and share your thoughts and suggestions, email me at shadean@bu.edu

Special thanks to the team who produced this podcast, Mara Littman, Andy Hallock, and the entire team at BU School of Hospitality Administration. To keep up with Distinguished podcast, be sure to subscribe wherever you listen to your favorite podcast. You can also learn more about our undergraduate and graduate programs at BU School of Hospitality by visiting bu.edu/hospitality. Have a wonderful day, and thank you for listening.