Saru Jayaraman Fights for One Fair Wage

The battle over raising the minimum wage for tipped workers and permitting tip pooling bounces to the Massachusetts ballot this November. Saru Jayaraman, President of One Fair Wage and Director of the Food Labor Research Center at UC Berkeley, argues that the current tipped wage structure perpetuates low pay and high turnover. Although the wage increase would occur over five years, opponents assert the mandate would be detrimental to some small and independent restaurants and could fail to increase employee job satisfaction and retention.  

This episode is part of the Tipping and Wage Series where we explore the various angles of this debate with restaurant owners, advocates, academics, and consumers to gain a deeper understanding of the bottom line. 

Boston University School of Hospitality Administration is committed to presenting topics shaping the hospitality industry's future with thoughtful and constructive discussion that respects different perspectives. We welcome your input and feedback. Email us at shadean@bu.edu  

Tipping and Wages Series podcasts: 

The Psychology of Tipping with Michael Lynn, Ph.D., Professor of Services Marketing, Cornell University’s School of Hotel Administration 

The matters that Massachusetts Restaurant Association wages for (and against) with Stephen Clark, President of MRA 

Restauranteur's Dilemma of Balancing Equity and Economics with TJ Callahan, co-founder and owner of Farm Bar 

California Raises Minimum Wage for Fast-Food Workers with Chris Simms, CEO and Founder of Lazy Dog 

Referenced in this podcast: 

Always Essential, Still Waiting for Change: Service Worker Fatalities and Inequities During COVID and Post-Pandemic, March 2024

Dean’s Distinguished Speakers Series with Saru Jayaraman, presented by BU School of Hospitality, February 7, 2024 

Press Release: Department of Labor Renews Multi-Year Initiative to Provide Enforcement, Outreach, Education for Restaurant Workers: 85% of investigations find violations in fiscal year 2021 

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: Welcome to the Distinguished podcast. I'm your host, Arun Upneja, Dean of the Boston University School of Hospitality Administration. Today, we are poised for a thought-provoking conversation with Saru Jayaraman, the president of One Fair Wage, on the transformative potential and the contentious debates surrounding tipping and fair wages in hospitality. Our commitment at BU is to prepare future leaders who are equipped to navigate and shape the industry landscape, embracing innovation while scrutinizing proposed changes to ensure they serve the greater good. Saru, welcome back to BU School of Hospitality and thank you for joining us to explore these pivotal issues from multiple perspectives. 

Saru: Thank you for having me. 

Arun: Please note that the One Fair Wage position from our Dean's Distinguished talk in February this year is available on the BU School of Hospitality YouTube channel. So let's start, Saru, with the basic question. When we talk about the ballot initiative to eliminate the subminimum wage, the Massachusetts Restaurant Association argues that the subminimum wage, the term subminimum wage is inaccurate because the tipped wage laws, every tipped employee is guaranteed minimum wage, which could be a combination of tipped wage and tips. So if tipped employees are earning the minimum wage, and in many cases well above the minimum wage, what's the justification for framing the tipped wage as a subminimum wage? I know it's just semantics, but that framing conveys information to the reader's listeners, which may not be accurate. 

Saru: So the subminimum wage is important to understand in both historic and current context. Historically, the subminimum wage for tipped workers was created to allow restaurants to hire newly freed black women after emancipation to, for free, and tell them they were going to live on tips. It's important to note that prior to emancipation, waiters in the United States, in Boston, were white men who got full wages, no tips. And the wage, the value placed on these workers went down from a full minimum wage to no wage, just as the population of these workers changed from white men to black women. And so, I don't know how you understand that. Sub means less than. I don't know how you understand going from a full wage to no wage, based on the identity of the population, other than calling it less than a minimum, less than what it was. And that idea that this population of mostly black women could get no wage, only tips, became law in 1938 as part of the New Deal, when all other workers received a federal minimum wage for the first time. But again, these workers were given zero dollars. They're told you can be paid as little as nothing, because you're getting tips. And we went from zero dollars in 1938 to two dollars and thirteen cents an hour. Now, we continue to call that a subminimum wage, because it is far less, sub, far less than the actual minimum wage paid by employers, not by customers, not by anybody else. But what is the employer paying the worker? Actually, the social contract that comes from the idea of a minimum wage, it's a contract between the employer and the worker, not anybody else, not the customers, not the government. The minimum wage is the idea that an employer pays something, the least of something, minimum, to workers. And if we're allowing employers to pay less than that, then that is subminimum. But more importantly, in this current day and age, you said that the Restaurant Association claims that, you know, federal law says tips have to bring workers to the full minimum wage or the employer makes up the difference. So let's examine whether that's actually happening. 

So from 2009 to 2011, the US Department of Labor under the Obama administration actually conducted a very thorough investigation of thousands of restaurants to see whether the rules and laws surrounding this two-tiered wage system were being complied with. They found an 84% violation rate with regard to employers actually ensuring that tips brought you to the full minimum wage or they would pay the difference. At that point, the Solicitor General of the US Department of Labor, Patricia Smith, declared the issue unenforceable. She said, it is so complicated, it is so much for small businesses and large businesses to have to go back hour by hour and figure out whether workers got the tips they need to bring them to the minimum wage or pay the difference. It's so complicated for them, it's impossible for us as a federal agency, which frankly has a lot more power and resources than a state Department of Labor like Massachusetts. She said, this is unenforceable. That is the point at which the Obama administration actually changed their stance from being for a sub-minimum wage or tipped workers to saying, no, we need a full minimum wage with tips on top. But more recently, that was about a decade ago. More recently, we have surveyed here in Massachusetts and around the country, thousands of workers. Our most recent survey of over 2000 restaurant workers, over 50 percent, actually closer to 57 percent of workers say, I regularly do not receive a full minimum wage with tips. It happens when days are slow.  

Arun: So as long as workers say they're consistently not receiving the full minimum wage with tips and employers are not making up the difference, it continues to be a sub-minimum wage. So, there are two big issues here. One is the historical context and I'm going to return to that in a minute. But let's talk about this enforcement and you cited a statistic that 57 percent of staff have said that they consistently do not receive this. Where are you getting this 57 percent number from?

Saru: So we as One Fair Wage have been conducting surveys of restaurant workers. I mean, I'm also an academic, so we conduct surveys across the country. We have been for 20 years. Our most recent survey was funded by the Robert Wood Johnson Foundation. They funded us to do a big study of restaurant workers. We actually set up a pretty rigorous method with a survey instrument and had paid surveyors out conducting surveys with restaurant workers. Fifty percent, seven percent of the over 2,000 workers we surveyed said they are regularly not receiving the full minimum wage with tips. They didn't say it was all the time, every shift, but they said it happens pretty consistently, that there's a slow shift or a slow day. The tips don't bring them to the minimum wage and the employer does not make up the difference. 

Arun: I'm sure that restaurant owners would differ, and I wonder if there is, to some extent, since this is what you're advocating for. 

Saru: I think that even if restaurant workers want to differ over our data, I would encourage you to look at two sources of data. The US Department of Labor analysis of this issue from 2011, 2012. And again, more recently, US Department of Labor Bureau of Labor Statistics data, which shows the median wage for tipped workers in the United States. Right now, the median wage for tipped workers in Massachusetts hovers just around the minimum wage, which tells you that more than half, I mean about half of workers, because median means it's the middle, means that half of tipped workers earn less than the minimum wage consistently. That's employer reported payroll data, Arun. So that's not me. That's not even workers. That's what employers are reporting to the US Department of Labor as their payroll data. If half, about half of workers are saying they earn less than 15, that means that tips are regularly not bringing workers to the full minimum wage, and employers are not paying the difference.  

Arun: The restaurant operators I speak to, and I've spoken to, and those who have yelled at me as well, many of them have told me and there are from upscale fine dining establishments, and they say that their staff, their bartenders, their servers, they are routinely earning in excess of $80,000 a year. So that is clearly nowhere close to the median or even the minimum wage is way beyond. 

Saru: Right, but that is purely anecdotal. I think as academics, we have to look at the most reliable source of data. It's not anecdotal. It is either survey data or even more, even better, government data. And again, this is what I'm referring to as employer reported payroll data. So either employers are not giving the correct information to the US Department of Labor, or they're not telling you the right information now. It has to be one or the other. But again, you cannot make policy in Massachusetts or in the United States based on anecdotes or what individuals say. You have to make policy based on what is the median, what is the average experience, what is the overall experience. I am sure there are servers in Boston who sometimes make a lot of money and tips. I'm sure those workers even make less when there are blizzards or there are bad days or very hot days. Climate change is impacting workers' tips. I'm sure there are times when even the highest tip earners experience economic instability because that is the nature of tips. But you cannot look at the highest tip earners. You cannot look at the restaurants where tips are highest. 

You have to look in creating policy at what is the overall experience of tipped workers in Massachusetts. Looking at the overall experience of tipped workers in Massachusetts, they have at least double the poverty rate of workers in other industries. They are using food stamps at least double the rate of other workers in other industries. And food stamps are a really good measure, Arun, because people do not apply for food stamps to go to the prom or to get some extra income to, like, I don't know, do something fun. Food stamps are very hard and stigmatized to apply for. And so if you're going after food stamps and actually obtaining them, you've gone through a rigorous stigmatized process because you cannot feed yourself and your children. So the fact that tipped workers in Massachusetts use food stamps at double the rate of other workers, to me, is that's all you need in terms of data to know that there's a problem here. 

Arun: So let's go back to this historical, actually, before we go back to the history, I had Dr. Mike Lin from Cornell here as a guest on the podcast, and I was asking him, okay, so what are the factors that determine tipping? And pretty much he said most people, on average, are tipping at about 20%. So, the other statistics that you are citing, which I need to obviously go back and look at them, are at odds with the general practice where there's extensive research has found that most people are going to tip at that high level. 

Saru: How are they at odds? If you work at IHOP and Denny's, and your pancake is less than five, eight dollars an hour, 20% of five is one dollar. So most people do not work at restaurants where the bill is $100 and you get a $20 tip. Most people work at very casual restaurants where prices are far less, and tipping is, as a result, as a percentage far less, and not enough to live on for a worker who earns $6.75. So the worker at the IHOP is earning $6.75 with 20% of a $10 meal, and the worker at a fancy fine dining restaurant is earning $6.75 with 20% of a $100 meal. So the worker at the IHOP is getting at most $2 for one person's meal. The worker at a very fancy fine dining restaurant is getting $20 for one person's meal. So it's not at all at odds with what I'm saying. 

Arun: Right, but the server at the IHOP or Denny's is not just serving one customer who is ordering $10 worth of stuff. In one hour, if they serve 10 customers, and let's assume the average bill is $10 per person, that's $100, and then you're getting $15 or $20 in tips in addition to your $6.75. So you're still way beyond the minimum wage. 

Saru: That's assuming you get 10 people in an hour at Denny's in an overnight shift, number one, but you're also forgetting, Arun, that waitresses servers do not keep their tips all to themselves. They share it with bussers and runners and bartenders and other people in the restaurant. So they're not keeping $15 or $20 in an hour. At most, maybe they keep $10. Maybe, that's lucky, you get $10 in tip in an hour. Add that to $6.37. That's $16. So you are getting about the minimum wage, which is exactly what I said at the beginning. The median in Massachusetts hovers around the minimum wage, including tips, which means you have to understand that there's a significant portion of people who earn less than that because that's the median. 

Arun: Yeah, I think we need to also get a small restaurant, or maybe a Denny's or an IHOP owner to get some more. 

Saru: I don't know that owners are ever going to tell you, you know, I think you need to have a worker. I mean, have you ever had a worker on your podcast? I would love to bring a worker who can share what it's like, exactly what they earn in tips, exactly the many instances where you haven't had tips and you end up not getting the full minimum wage, what that feels like, and the precarity of sometimes getting it, sometimes not, the vulnerability that comes with that as well. So you've spoken to a lot of owners on this podcast. I would encourage you to speak to, we're happy to bring you workers who can share their experience. 

Arun: Right, I think in addition to workers, but like you said a few minutes ago in the podcast, those are all anecdotal evidence. I think we also need to go to the companies that are providing the payroll services to see how their systems are set up if they are doing this on an hourly basis and doing the calculations. Because most restaurant companies would probably hire some payroll companies that provide the payroll service to them. 

Saru: So I will give you an example. I spoke to an IHOP worker who said, tips consistently did not bring her to the full minimum wage, but the employer told her, you better report that you are actually earning the minimum wage and tips, because I don't want to have to deal with the difference. I don't want to deal with corporate telling me you're not earning enough. I don't want to deal with corporate getting upset with me for having the company having to pay the difference. That happens all the time. And so workers are then asked to report on income they're not actually earning. They get retaliated. Their boss is telling them to do this, so they get retaliated. So I would encourage you, if you don't want to speak to workers, speak to the Massachusetts Department of Labor or the US Department of Labor. Those are sources of aggregate data, again, employer reported payroll data, that are much more reliable than anecdotal evidence from employers. But as long as you are talking to employers, I encourage you to also talk to workers. But if you want the most reliable aggregate data, I will say the US. Department of Labor is the place to go or the Massachusetts Department of Labor. 

Arun: I think you've already identified a few more guests that we need to invite to the podcast, the workers. But to be fair, a lot of when you say that the employees are forcing the workers to report tips, but those are cash tips. Most people now are paying with credit cards. 

Saru: That's true, especially fancy fine dining restaurants. But you still see cash in very casual restaurants, particularly I've had to say where elderly people eat, IHOPs and Denny's, Apley's. These are places where you still see elderly people on a fixed income eating and often paying in cash because that's what they feel most comfortable doing. 

Arun: So number one is an enforcement issue, that the government is not enforcing its own laws. And to counter that, we are now trying to change the system for everyone, including the staff that are making way above the minimum wage. 

Saru: I would argue it's much more than an enforcement issue. As I mentioned from the beginning, this was a system created to basically allow restaurants to access free black female labor. And even if in this moment you had 100% compliance with the law, even if every employer ensured that tips brought workers to the full minimum wage or paid the difference, you'd still to this day from 1865 have a population overwhelmingly women, disproportionately women of color, highest rates of single moms of any occupation, and highest rates of sexual harassment of any occupation. You'd still have a population that's getting the majority of their income from the whims and biases of customer tips. The professor Michael Lin has published data in the past that shows that tipping is overwhelmingly biased. It's actually very correlated with the race and gender of the server. And so, black women consistently get tipped less than white men. And we have the highest rates of sexual harassment of any industry, because when a woman is forced to get a majority of her income from customers, whose biases and behavior are going to impact whether or not she gets tipped at all or tipped well, that means she has to put up with whatever the customer does to you, however they treat her or talk to her or touch her, because she's reliant on their income, not the $6 to pay her bills. The $6 is so low, it goes to taxes, and so she truly is completely dependent on her customers to feed her family. And again, that makes her very vulnerable to all kinds of abuse and harassment. 

Arun: Right. And I think when I had a conversation with Michael, and he did say that the 20% is pretty much standard, regardless of the level of service, regardless of who's serving you, it's only beyond that people get more tips. Okay. So then I do want to return back to this historical context, where you talked about how black women were being hired at this subminimum wage. But since then, what has happened has there been a change in the society. And well, at that time, tipping was not expected, but now, tipping has pretty much become standard in restaurants. And this 20% number, which has increased from 15% 10, 15 years ago. Now, that has become ingrained in our society. And people who have done these experiments find that, and I had TJ Callahan from Chicago. He also did this experiment. Customers want to tip. So when you increase the wages, you increase the menu prices, or you add a service charge, and you say, you don't have to tip anymore because you already increased the prices to account for fair wages, then customers are unhappy with that whole, because it is ingrained in the society. 

Saru: So that is not what we are advocating for. What we are advocating for is what the seven states already require. California, Oregon, Washington, Nevada, Minnesota, Montana and Alaska already require a full minimum wage with tips on top. Ninety-nine percent of restaurants in those states have traditional model of tips, not service charges, and tipping is the same or higher, as Michael Lin has said, in those states as they are here in Massachusetts. In fact, quarter four 2023, which is the last set of data we have, California had the highest tipping average of any state in the United States higher than Massachusetts. So nobody's advocating for tipping to go away. In fact, tipping is that same or higher in the states that are doing the policy that we're already advocating for. In addition, I would really have to push back, I don't know when you talked to Michael Lin, but there's been so much research and press now that in the last several years, particularly post-pandemic, tipping has declined pretty significantly. As sales declined, tipping declined. People are experiencing tip fatigue as more and more establishments outside of the restaurant industry try to introduce tipping in even retail environments, because they're trying to access the same exemption that the restaurant industry has. So as customers are being asked to tip in many, many environments, they are tipping less in general. Just yesterday, the Washington Post reached out to me there is a new survey out that showed that 51 percent of Americans feel it's perfectly okay not to leave any tip at all if they feel they weren't pleased with the service. And so, we regularly see this happening. Maybe on the whole, people tip. On the whole, people want to keep tipping. But we are seeing a general tip fatigue across many sectors, and we are seeing definitely instances frequently where some people feel it's okay not to tip. And all of these instances point to the instability and unreliability of tipping. Tipping is not something you can ever be guaranteed or count on. You cannot, you say, Michael Lin says it's 20% across the board. But that doesn't mean a worker consistently receives 20% all the time, every day, every month, every. But you know what is consistent for that worker? They have to pay rent every month. You know what is consistent? They have to purchase groceries, and they're facing the exact same inflationary prices in the grocery store that you and I and restaurant owners are facing. You know what is consistent has been the increase in gas prices over the last several years since the pandemic. All of those things have been consistent. The wage has remained stagnant. The one thing that is not consistent and actually has been declining is tipping. 

Arun: So there is a tipping fatigue, and I feel it, and I think everyone feels it. We go every single place we go, there is a... So there is a tipping fatigue, but I am curious to know if the tipping fatigue is with all the other places that have jumped into the fray and asking for tipping, or is it even in restaurants where with the increase in prices, with the increase in inflation, increase in the logistics, and so the price rise that we see, and then the percentage of tips, obviously if the tipping percentage is fairly steady at 20%, with the rise in prices, your tips would go up automatically. But I want to go back to the example of Washington DC, where recently there has been this huge, and so many people who have eaten at restaurants they send me their bills and say, look the price of eating out in DC has just skyrocketed. Unfortunately DC is not a very good test market because there's a lot of lobbyists, a lot of people who are coming to convince the government to sort of, you know. So it's, and then obviously government has deep pockets. So it's a very, it's not a very good test market for normal consumers for a city like Boston or New York and any other places. But their cost of dining out has increased, and a lot of restaurants are going under. Of course, new restaurants keep coming. There is always optimism. Entrepreneurs always believe they can make the difference. But a lot of restaurants seem to be closing shop there. 

Saru: So again, I encourage you to look at government data before making claims. And if you look at government data, one year after the passage of November 22, I-82, November 23, the only source of government data that the DC Attorney General relies on is licenses to restaurants. If you look at licenses to restaurants, they went up by 10 percent from November 22 to November 23. So that is the only source of data. The government finds reliable in terms of the number of restaurants in DC, increased by 10 percent. Then we looked at the number of restaurant jobs in DC. That's again, US. Department of Labor, Bureau of Labor Statistics data increased by 7 percent. Then we looked at overall income per, again, employer reported payroll data, wages and tips, increased by 6.8 percent. And so all of the measures that there's wild claims about, in terms of restaurants closing and tips going away and jobs being lost, have not been borne out in the government data. Again, I encourage us to look at reliable government data rather than anecdotal data or claims. And again, those are the data sources that the DC Attorney General uses and that we used as well to look at what's happened in the district. I do want to say something unusual happened in the district that didn't happen in the other places where One Fair Wage was passed. After One Fair Wage passed in DC, the Restaurant Association actually pretty openly told restaurants, all you have to do is switch from tips, which are the property of workers, to service charges that are the property of owners, and take the money that you need to cover the wage increase out of the service charge and use it to cover your labor costs. This is not what the 75% of voters who voted yes on the proposition were expecting of restaurants. 

The minimum wage is a social contract between employers and workers. And when the people of the United States say, we need to raise the minimum wage because it's too low, because workers cannot afford to live on these wages. When the people of the United States say that, they're expecting employers to pay more, and to figure out, through prices, through their business model, how to pay more to workers because workers need to be paid more as human beings with families and who are consumers themselves and contribute to our economy and pay taxes, we expect employers in the social contract to pay workers enough to survive, to not be on public assistance. And so when the voters of DC voted to raise the minimum wage, they did not expect employers to take that money from workers. They expected employers to actually figure out how to raise the minimum wage, as happened with $15, and frankly, as happened with every other worker that's gotten a minimum wage increase in the last century in the United States. Instead, this industry said, we don't want to have to pay more. We don't want to take it out of our profits. We don't want to, we refuse. And so we're going to take it out of the workers' gratuities. And so they switched many of them from tips to service charges and told, did not tell consumers what they were doing with that money. I think they were surprised by the amount of consumer backlash. Consumers were furious at the Restaurant Association and restaurants in DC. 

I remember seeing very long lists on Reddit of consumer boycotts against restaurants, not at all organized by us, by consumers who are angry at restaurants for putting very confusing service charges on their menu. Finally, the DC Attorney General cracked down on the issue and actually put out guidance saying restaurants must indicate very clearly, not just, oh, this is going to workers, but is it being used as a tip, meaning passed on 100% to workers, or is it being used by the employer for the labor costs that we as a society, per a social contract, expect them to pay as the minimum that they pay their workers, the minimum wage. And so that confusion did dissipate with the DC Attorney General's guidance. And now every time we are advancing policy in other states, watching what the Restaurant Association did in DC, we are similarly including language that says service charges need to be clearly explained on the menu. Is this actually being passed on to workers, or is it being used by the employer to cover labor costs? 

Arun: Let me retrace the beginning you said that, and I did see the report that there was an increase in restaurant licenses. Are you attributing that to an increase in the wage? 

Saru: No, and actually in the report we say there hasn't been a full increase in the wage. The wage has gone from five thus far to eight dollars an hour. So we have not gone all the way to the minimum wage. There's been a bare increase of three dollars. So we are not claiming that everything's better because the wage went up. We are refuting the notion that as the wage increases, you started the conversation saying restaurants are closing, prices are going up, all of these things are happening. And I'm asking you to look at the government data, which does not show that. 

Arun: So you also talked about how you are expecting the restaurants to pay for the increase either through raising menu prices or through their own operating expenses. And the restaurant owners claim, and the operators claim that this makes it unsustainable because historically tips have been, you know, the tip credit system has been in place, so their entire economy is built around this tip credit system. And TJ Callahan on the podcast, before that, he sent me his financial statements for the entire year. And I was not able to figure out how he could, what he would do to be able to pay that if he was forced to go up to the minimum wage without that. And his service staff were also making way more than the minimum. So, I'm not sure how you think that restaurants can now easily absorb this extra expense. 

Saru: So, change is never easy, but it is necessary. So, I guess the alternative, Arun, would be to leave wages exactly as they are forever. And we've not agreed to that for other workers. We have, as a society, continued to demand that wages go up with the cost of living. That wages continue to increase with the cost of living. So, I mean, frankly, restaurants made the same claim when we were trying to pass $15 all over the country. How could I, how could you make it work? Here are my, here are my expenses. What can I do? And when policy required all businesses to go up, they figured it out. They figured it out. And in fact, the CFO of Denny's in California, actually nationally, said that Denny's is growing faster in California than any other state in the US. Because we pay our workers now $16.50 plus tips, and because those workers do what? They now can eat out at Denny's. They bring their families to eat at Denny's. So actually, guest receipts are higher, and the company grows faster. So I'm not saying that people, it's going to be very easy, and everybody can do it right at once, which is why in every policy that we've implemented, these are phased in increases. But frankly, they're phased in increases that are exactly the same as the phased in increases that every other business has had to go through as the minimum wage goes up across the board in other sectors. So we can't have one industry where wages stagnate forever, and other industries where we acknowledge wages have to go up. And we can't have one industry that is getting away with not paying their workers the minimum wage, while every other industry is responsible for paying their workers the minimum wage, again, per the social contract, that employers pay for the value of the labor through a minimum wage that we've agreed on as a society is necessary to ensure workers don't get paid less by their bosses. 

Arun: Let me push back at the fact where you say that restaurant wages would stagnate, where all the other industries would go up, if the minimum wage goes up in any state, if in California it goes up to $20 an hour for everyone, that also includes restaurant workers. 

Saru: Yes, in California, but not in most places. In fact, I don't know if you know the history federally, 1991 was the last time the subminimum wage for tipped workers went up. 1995, the overall minimum wage went up in Congress, and at that time, Herman Cain was the head of the National Restaurant Association, struck a deal with Congress that they would allow the overall minimum wage to continue to increase, and it did, as long as the subminimum wage for tipped workers stayed frozen, and it has since 1995, since 1991.  

Arun: But even the federal minimum wage has not gone up for quite some time. 

Saru: It went up, actually, that year, it went up, it has gone up, it went up to 5.15 that year in 1995, and then to 7.25 in 2009. And during those two increases, the subminimum wage for tipped workers stayed at $2.13 an hour, because of this argument by the Restaurant Association that it's okay to raise everybody else's wages, but the subminimum wage for tipped workers should remain frozen at $2.00. 

Arun: But those workers would continue to make the 7.25 minimum, which is the minimum wage because the employees have to make up the difference. 

Saru: Not if there's an 84% violation rate, according to the US. Department of Labor, at the moment of the highest levels of enforcement of that issue. 

Arun: This 84% statistic is staggering, and obviously we'll have to look more, and maybe provide more sort of research into this issue. And if it is a very, very old number when, you know, recent statistics, I'm not sure how old this 84% statistic is.  

Saru: It's about 10 years ago, but that was the moment of the highest level, like there has been no further higher levels of enforcement. I have spoken with the US. Department of Labor currently under Biden. Again, they say the restaurant industry is the number one violator of wage and hour laws of all industries in the United States. And they are looking at publishing a new set of data on this same issue, but they have definitely confirmed that there is no other data, there's no other industry with higher levels of violation of these two-tiered wage system than restaurants. You don't even have to go there, though. More recently, the Massachusetts Department of Labor and Attorney General's Office actually published data that was shared at the hearing in, I believe, that was early March here in Massachusetts on this issue, on our ballot measure, and had staggering data showing an overwhelming number of violations on this issue with regard to employers actually ensuring that tips bring you to the full minimum wage or making up the difference. They also indicated that the restaurant industry is the number one source of violations of the law. 

Arun: I'm really having a hard time reconciling this 84% or the staggering number of violations which you say, with the fact that upscale restaurants where the average check is pretty high, those workers, we don't even have to go into any detail, they are making way more than the minimum wage. Then you have all the national chains that are presumably using payroll services, are very strong internal control in-house systems, where they would ensure that they are meeting the wage laws, otherwise, you know, they'd be in big trouble with auditing and so forth. So, we are down to a much smaller segment of restaurant that potentially can violate this, but that number doesn't reconcile with the 84% number that you said. 

Saru: I think you are giving a lot of credence to employers, all of the employers that you have just cited. So, we have received any number, a large number of wage theft complaints from workers in fine dining restaurants. Yes, some people may make a lot of money sometimes, but people regularly experience slow shifts even in fine dining. Here in Massachusetts, people regularly experience slow shifts when the weather is extreme. People regularly experience slow seasons even than higher seasons. People regularly experience both violations of wage and hour laws, you know, either an employer taking a portion of the tips or the tips being improperly shared or the tips not bringing people to the full minimum wage or very frequently very high levels of sexual harassment that occur from having to live on tips. So, that occurs even in fine dining. Then in the chains, I've already shared, I've heard countless stories of workers experiencing wage theft at IHOPs and Denny's and Applebee's. Being a large corporation, Arun, has never, has never ever been a full stop barrier against breaking the law. In fact, sometimes the chains, the large corporations are the greatest violators of the law. We see that in a number of industries, including the restaurant industry. How do they do it? Well, I've seen it myself. In fact, in litigation with a very large company, they had to, in a subpoena, send us all their payroll records, and they had actually blacked out, like changed the number of hours somebody worked, changed the number of tips somebody received. So we have seen them violate the law. It happens. I don't know how you can assume that because they're a large corporation, they don't break the law ever. That's honestly the contrary of most people's experiences with large corporations. They break the law with immunity regularly. In fact, right now, that National Restaurant Association, which is led by the chains, has bills moving in 22 states to weaken child labor laws. Why? Because they have so consistently had very young people, they are breaking the law by hiring very young people, and they now want to do it with immunity. So they are trying to weaken child labor laws so that they can continue to do what they've been doing, which is having very young people working in restaurants. In one of the houses of the Wisconsin Legislature, they got a bill passed to have 13-year-olds serving alcohol in bars. Now, that was happening already, and they are looking for immunity to do that. So this idea that somehow there aren't violations of the law in large corporations is very naive. It's very naive because we're seeing massive amounts of violations of the law in these corporations. 

Arun: So, it's very clear that restaurant owners, operators are opposed to your ballot initiatives. So clearly, they are not providing you with funding to continue your battle. So, who is, so are this, the serving staff, the bartenders, the bussers, are they in support of your initiative? And who's funding your campaign nationwide to eliminate the tip credit? 

Saru: Yeah. So, we've done both surveys and polling of tipped workers. Polling meaning, you know, hire a polling firm that uses, you know, very objective methodology for every poll to ask workers, do they want this or not? And in Massachusetts, we did a poll with a polling research firm of tipped workers. Over 70% said, yes, we want a full minimum wage with tips on top. More recently, we did surveys of thousands of workers. About 90% said, yes, we want a full minimum wage with tips on top. But you don't actually have to look at these surveys and polls. I think you should look at the fact that we are still in the most acute staffing crisis in the history of our industry. Workers have demonstrated whether they're willing to work for these wages through their feet. And the fact that restaurants are still struggling to find people is an indication that this is not working. People are still not willing to come back in the numbers that they were. We lost 1.2 million workers during and after the pandemic. Most of those workers did not come back. The fact that the industry has such high levels of turnover. Why do you think that is? Do you think that's because workers just enjoy leaving their jobs frequently? No, it's because nobody can stay over the long haul with such low wages. 

And we actually did work with Dr. Rosemary Batt at Cornell University School of Industrial Labor Relations to study turnover in the restaurant industry, which is ridiculously high. We found that you can cut your employee turnover in half by providing a full stable wage with tips on top and providing people with the opportunity to move up the ladder. Those things matter in terms of reducing turnover. I mean, frankly, that's a management 101 idea. You know, you pay people well, you treat them well, they stay. And so I don't think you need to look at polls and surveys. You can see whether workers want this. I think you can look at the fact that workers are not staying in these jobs. They're not coming and they're not staying in these jobs to know that the system is not working. 

Arun: Right. And so there are a lot of restaurants that have already moved since they're not able to get employees. So the question is, how is your nonprofit being funded? Who out of these stakeholders is actually saying, yes, we want this and here is the money to help you wage the battle? 

Saru: Well, workers are saying they want this and they're out there collecting signatures. So they may not have money because they're paid $6.75. So they don't have the funds that the National Restaurant Association and the employers you're speaking to have to fight. They have their time and even that is very difficult because they're often working two and three jobs. So it's workers leading the efforts, workers who actually frankly asked us to come to Massachusetts and lead the effort. And there are donors who support workers who believe in economic equality and racial equality and gender equality who support our work. 

Arun: Okay. So one other, you know, there is this ballot initiative that you're sponsoring has two elements to it. One element of course is to remove the tip credit. The other element is that you would employ, you would allow employers to pool with the back of the house staff as well. Everyone who's earning an hourly wage. So on one hand, the increase in the removal of the tip credit would increase their earnings. On the other hand, the pooling of the tips would decrease the earnings. So how does that help you to increase the earnings of the tip staff? 

Saru: It doesn't actually work like that. So every other state in the United States, except for New York, allows for tip sharing with all non-management staff once everybody's paid a full minimum wage with tips on top. So we would never agree to tip sharing with back of house unless and until workers are paid a full minimum wage as they are with tips on top, as they are in California, Oregon, Washington, Nevada, Minnesota, Montana and Alaska. Now we've done what's called quintile research. We've looked at the five quintiles of tipped earners in California from the top earners at the Ritz-Carlton in San Francisco to the bottom earners at the IHOP in Fresno or Bakersfield, and compared that to their comparators, quintiles in Massachusetts. We see for every quintile from the top to the bottom, even with tip sharing, even getting a full minimum wage with tips on top and tip sharing, California workers are earning significantly more. The top tip earners in California are earning significantly more than the top tip earners in Massachusetts. Why is that? Because the increase from 675 to 1650, which is what we're paid in California, is $10. You don't share $10 worth of tips per hour. You share maybe a few dollars if that in tips with other people. The overall increase that you get in both wages and tips, because you continuously have said it's 20 percent across the board, it doesn't change state to state. You've said that over and over again, and so if that's true, as wages go up, tips go up, and so tipping is more in those states, and so as tipping is more, there's more to share. And with the wage increase and higher tips, even with tip sharing, workers in California at every quintile are making more. 

Arun: Well, the other way to look at it is say prices in California are higher for everything, and so your percentage of tips. The vision that you provide of California is perhaps at odds with the rest of the country thinks of California where people are leaving the state and businesses are leaving. 

Saru: I agree with you that rent is higher. Absolutely. No questions asked. I'm so sorry. I was refuting the idea that restaurant menu prices are higher. So I would ask you to right now go online and look at the Applebee's in Fresno or Bakersfield where the wage is 16.50, and look at the Applebee's here in Boston where the wage is 6.75. You're going to see the exact same menu prices. Now, I'm not saying that there can't be some modest menu price increases as wages go up. I'm saying that over time, what we find is actually a dissipating of significant menu prices because what happens? I'm going to come back to the CFO of Denny's, who said that as wages went up for them in California, Denny's workers were able to eat at Denny's, guest receipts were higher, the company grew. So it isn't all about menu price increases as wages go up. You experience less turnover, that's a savings. You experience higher retention rates, that's a savings. You experience more guest receipts, higher traffic. So that's revenue. So I don't think it's a... It's not a... Please understand, it's not a one-to-one thing. It's not like $1 of wage increase results in $1 of menu price increase. In fact, economists have seen it's about 12%. 12% to go... That was when we were looking at a federal bill to go from $2.13 an hour to $15. 12% phased, 12% menu price increase over eight years. That was the phase out of the bill at the federal level. Eight years, your burger would go from $10 to $12. That is not these, you know, enormous menu price increases that we're talking about. That is very modest and frankly less than what we've experienced in gas prices and food prices increases over the last couple of years.

Arun: You know, so I just want to talk about that. When you cited the example of Bakersfield versus Massachusetts, you know, if you go to New York and you have this famous one dollar slice of pizza, you don't find that anywhere. So it's the profit margin per and the volume of traffic that is generated, which is also partly responsible for them being able to sell at that low price versus other people, other places are not able to sell that pizza. So with the passage of this, I expect that people will see a little bit higher prices when they go out to eat more. To end it all, to wrap up this segment, I have a quick round of lighter questions for our listeners to get to know you better. So what's your favorite leisure time activity other than eating at restaurants? 

Saru: Reading or spending time with my children. 

Arun: Who are your heroes who are making a positive difference on a national or worldwide level on any issue of critical importance to society? 

Saru: First, I have to say, I'm a worker organizer, workers. Over the last several years, we saw 1.2 million workers, mostly young people, often women, demand more, walk off the job and say, this isn't working for me and demand more. And that for a low wage worker who is facing, how do I pay the bills? How do I pay the rent? To say, you know what, I'm worth more, takes enormous courage, enormous courage, enormous, enormous strength and resilience. And so that's my number one hero. I would love to name incredible restaurant owners that have been working with us on this over the years, all over the country. Incredible restaurant owners, Zingermans in Michigan, incredible restaurant owners who have been supportive of raising wages here in Massachusetts. Mamalas and Irene Lee from Meimei and Bipla Rao from Comfort Kitchen and many others have been leading voices on this issue, have been very supportive of these issues. So I think both workers and employers in this industry are who guide me in terms of this work. There is clearly a better way of doing things that's better for all. 

Arun: What is the favorite food that you enjoy most at restaurants and do you feel safe eating at restaurants? 

Saru: I feel safe eating at restaurants most of the time. I obviously wouldn't go to places that, you know, where people have done some very, engaged in some very bullying behavior towards me and workers. So where I go, I feel safe because I choose to go to places that align with my values, that are, I'm, I'm vegan. So I like to go to places that have vegan options and that align with my values. 

Arun: Thank you, Saru, for joining us once again. It has been an engaging conversation on a very important topic. Thank you. 

Saru: Thank you. 

Arun: 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 Halleck 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.