NYC restaurants warn of dire consequences if tip credit system ends: Survey

According to a new survey, New York City restaurant owners are overwhelmingly opposed to eliminating the city's tip credit system.

The tip credit system allows restaurants in the city to pay workers who regularly receive tips a base wage of $10.65 an hour, provided their earnings with tips meet or exceed the city's $16 minimum wage. The model, under current law, ensures that employees always earn at least the minimum wage while allowing them the potential to earn significantly more.

However, the proposed legislation aims to abolish this system, compelling restaurants to pay the full minimum wage without accounting for tips.

The survey, conducted by the NYC Hospitality Alliance, reveals that 95% of restaurant owners in the city want to keep the tip credit, with 76% saying that they would have to increase menu prices if it was eliminated, in order to offset the increase in expenses for their small businesses. 

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Additionally, 67% of respondents said they would have to reduce staff, and 54% would contemplate closing their businesses if the tip credit is removed. 

"It’s clear New York’s restaurants and bars rely upon the tip credit," said Andrew Rigie, executive director of the NYC Hospitality Alliance. "There’s no reason for the state’s elected officials to upend the working model of New York’s restaurant industry and put small businesses and jobs on the chopping block, while making it much more expensive for New Yorkers and visitors to dine out in the Empire State." 

The report underscores that no restaurant worker legally earns less than the minimum wage under the current system, and notes that jobs in the tip credit sector rebounded faster post-pandemic than those in non-tip credit sectors.

Finally, the report argues that sector job growth has stagnated in areas like the District of Columbia, where the tip credit has recently been eliminated.