You Need to Know: The Minimum Wage Wars

Restaurant workers and their pay have been making headlines for nearly a year now as fast-food employees protest for higher wages and the Obama Administration attempts to increase the minimum for all workers. Here's what you need to know about minimum wage.

What's the current minimum wage?

The federal minimum wage rests at $7.25, but the federal minimum wage for tipped workers has remained stagnate at $2.13 since 1991. Only seven states require an equal minimum wage for tipped and non-tipped workers. According to U.S. law, employers are supposed to make up the difference if a tipped worker's earnings don't reach regular minimum wages, but as many servers know, that doesn't always happen.

Why not?

There are several reasons, including the difficulty of enforcement and irregularity of self-reported missing wages -- think unreported cash tips, for example. Between 2010 and 2012, the Wage and Hour Division of the Department of Labor conducted nearly 9,000 investigations in the restaurant industry, and discovered that 83.8 percent had some kind of wage and hour violation.

Wow, so what do those people do?

In 2011, The Economic Policy Institute, a liberal think tank, found that tipped workers are more than twice as likely as other workers to be under the poverty line. "There is a large disparity in poverty rates between tipped workers and the workforce at large." writes David Cooper at EPI. "However, this disparity is significantly smaller in the eight states where the tipped minimum wage is equal to the regular minimum wage."

What's the government trying to do about it?

The Minimum Wage Fairness Act, defeated this past spring, proposed a gradual increase of tipped workers' minimum wage to 70 percent of the regular minimum wage. The Obama Administration would like minimum wage hiked to $10.10.

Why didn't it pass?

Several reasons. There are many people in and outside the restaurant world who are against the bill. The National Restaurant Association lobbied against the Act, saying: "raising the minimum wage will be detrimental to job creation and low-skilled workers trying to get started on the economic ladder."

How many people does this affect in the restaurant world?

How does this play out?

Seattle is the best example of why a $15 minimum wage hike would or would not work. In early June, Seattle Mayor Ed Murray signed legislation that would bump city minimum wage to $15. The changes will take place in three to seven years, depending on company size. Tips and health care will count toward wages for the first few years.

The mayor argues that the wage hike will "lift tens of thousands of families out of poverty." Others think it will put small businesses, including restaurants, out of business. Seattle Chef Tom Douglas said of the wage hike: "That is a $5 million+ direct price hike annually on our menus, and consequently to our customers. That is more than double our bottom line before taxes and reinvestment. In other words, there is no way for us to absorb this expense in-house. This also does not reflect price increases we are likely to receive from our farmers, dry goods vendors and beverage distributors. This price increase is hugely inflationary to the restaurant business and is irresponsible when considering business people who have long-term leases and investments based on prior economic models." And others agree.

Some also believe a minimum wage increase will encourage layoffs and eventually, businesses replacing human jobs with automated machines (think ordering at a computer kiosk instead of with a person).

Haven't I been hearing about fast food protests for $15 minimum wage?

You have! For over a year, in fact. $15 would be a 67 percent pay increase on the average $9 an hour fast food wages. And many believe it's worth it. "A study by the University of California, Berkeley, found that fast food workers receive nearly $7 billion a year in public assistance," writes The New York Times. A minimum wage hike would reduce reliance on food stamps and other poverty programs, thus saving government money.

Is Seattle the only place acting on its own?

Not at all. San Francisco's hourly minimum wage is $10.74, the highest in the nation, and some are calling for a $15 wage.

Minnesota, Connecticut, Maryland and Vermont have all passed laws to increase wages over $10 in the coming years. Illinois Governor Pat Quinn just signed an advisory referendum to put the question of a minimum wage increase to $10 per hour on the ballot this November. And more states are looking at it.

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