The mayor called it ‘the right thing for wage fairness.’
Seattle will no longer use the tip credit come 2025, becoming one of the latest markets to opt for full minimum wage pay for tipped employees.

Washington State doesn’t have a tip credit—a policy that allows employers to pay tipped employees less than the regular minimum wage, assuming that tips will make up the difference.

However, Seattle passed a law in 2014 that created a temporary tip credit for businesses with 500 or fewer employees. That legislation will expire on December 31. Starting in the new year, tipped employees must be paid the city’s minimum wage, which will increase from $19.97 to $20.76 on January 1. Seattle currently has the second-highest minimum wage among any market in the U.S. (Tukwila, Washington, has the highest at $20.29 per hour).

“Seattle has one of the highest minimum wages in the country—this is a good thing for workers, a good thing for our overall economy, and something we should take pride in,” Harrell said in a statement. “As one of the leading members of the original team who developed Seattle’s groundbreaking minimum wage legislation, my mission is the same now as it was then—ensuring Seattle is both a great place for workers and a great place for small businesses.”

This policy change echoes Vice President Kamala Harris’ plan to eliminate the tip credit nationwide. Her campaign argues that removing the tip credit is essential for wage equity and economic fairness for tipped workers. Her proposal emphasizes that tipped employees should receive consistent wages, independent of fluctuating tips.

Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington do not have a tip credit. Major markets like Chicago and Washington, D.C., don’t have one either.

The union-backed anti-tip credit group One Fair Wage believes removing the tip credit and paying tipped workers full minimum wage would reduce inequities faced by women and minority workers. However, D.C. has seen an uptick in restaurant layoffs and closures since the city started phasing out the tip credit last spring.

Michael Lynn, a professor at Cornell University’s School of Hotel Administration, has research suggesting a changed system may not increase incomes as much as expected. It may even decrease pay. Other studies have found eliminating the tip credit can lead to fewer jobs and more restaurant closures.

The Employment Policies Institute (EPI) released a study from economists at the University of California-Irvine that found eliminating the tip credit hasn’t increased weekly earnings for women and minority servers. In fact, it has widened hourly wage gaps between non-white and white tipped employees.

Harrell referred to the removal of the tip credit as “the right thing for wage fairness.” However, the city official acknowledged that the adjustment will be a challenge for businesses still recovering from COVID and record inflation.

His office wants to “aggressively” combat many cost pressures faced by restaurants, including best practices in absence of a tip credit.

“I will be continuing our conversations with small businesses to identify tangible and actionable ways we can help make Seattle more affordable,” Harrell said. “We want successful, prosperous, and vibrant small businesses and entrepreneurs in our city, and we are committed to addressing these challenges, keeping existing small businesses here in Seattle, and ensuring this is a place where anyone has the opportunity to start a small business and succeed.”

Source https://www.fsrmagazine.com/feature/seattle-to-eliminate-the-tip-credit/