Is Today’s Minimum Wage an Honest Living Wage?
School of Hospitality Administration speaker series on Wednesday to address minimum wages, tipping, hospitality industry challenges
At $15 an hour, the minimum wage in Massachusetts is one of the highest in the nation, trailing only New York, Connecticut, Washington, D.C., the state of Washington, and California. The minimum wage still languishes in the single digits for many states, and the federally mandated minimum wage is only $7.25.
For perspective, the $15 hourly rate translates to a salary of $31,200, assuming a 40-hour workweek over 52 weeks, while a $7.25 rate equals a pay of $15,080. Are those living wages?
On Wednesday, BU’s School of Hospitality Administration will address that issue at its Spring 2024 Dean’s Distinguished Speakers Series, featuring Saru Jayaraman, director of the Food Labor Research Center at the University of California, Berkeley. Jayaraman is also president of One Fair Wage, a nonprofit that organizes service workers, employers, and consumers to push for local, state, and federal policies that require the minimum wage (with tips on top for all workers) and to end subminimum wages for millions of workers. The event, which requires registration to attend, will be held at the Center for Computing & Data Sciences from 4 to 5:30 pm.
In organizing the event, SHA says it hopes the forum will address the challenges facing the hospitality industry today: mainly, improving worker compensation and conditions while managing rising costs for businesses and the impact on their bottom line.
There are currently several proposed bills for Massachusetts legislators to consider that would raise the minimum wage to $20 an hour by 2027. The commonwealth’s Budget & Policy Center estimates that one million workers would benefit from the bills, mostly in hospitality industries and childcare and social services, almost 30 percent of all wage earners in the state. One bill in particular being debated would link the minimum wage to the rate of inflation, so that wage rates were no longer an annual debate.
It’s a subject of importance to SHA Dean Arun Upneja, and BU Today asked him for his perspective on minimum wages, tipping, and how the hospitality industry can manage rising costs.
with Arun Upneja
BU Today: Tipped workers in Massachusetts have a base salary just over $6 an hour, and then their tips are required to take them over the minimum wage. In recent years the commonwealth has aggressively raised the minimum wage to $15, an issue that impacts the service industry probably more than any other. For small businesses, the subject of fair wages is always delicate, because any major increase in the minimum wage challenges their already-small profit margins and makes their business model harder to sustain. Is there a compromise or alternative solution to help small businesses in the service industry manage big, steady increases in the minimum wage?
Upneja: Increases in the minimum wage are one of the myriad challenges facing small businesses today. Added regulations, operational complexities, high interest rates, and heightening inflation are some of the other issues that small and medium-sized businesses must grapple with. While it is hard for small businesses to manage big, steady increases in the minimum wage, it is equally daunting for individuals to maintain a decent standard of living without the increases. If the cost of living is going up, how do employees earning the minimum wage get by without a corresponding increase in wages? It is imperative for the government to address all these issues simultaneously, decrease the burden of regulation, and get inflation under control.
BU Today: Under one of the proposed laws, if an employer pays workers an hourly wage that’s at least the state minimum wage, the employer could administer a “tip pool” that combines all customers’ tips to tipped workers and distributes them among all workers, including non-tipped workers. Are you in favor of this approach, or do you worry it’s unfair to certain classifications of workers?
Upneja: By allowing a sub-minimum wage for tipped employees, the intention is that employers have more resources to recruit and compensate non-tipped employees, particularly those working behind the scenes. It does not always translate into practice. Back-of-the-house employees often receive lower wages compared to many other professions. By pooling tips with all hourly employees, we can lift wages for the entire service team. The concern about fairness of tip distribution is valid, particularly for those employees who traditionally make the bulk of the tips. One model I really like is the approach taken by bartaco [a national taco restaurant chain with locations in Brookline and the Seaport]. They have revamped the service model and tips are equally distributed to all hourly employees. There is no classification of employees called as “servers.”
BU Today: Over the next four years, one proposed law would dramatically increase the minimum wage from the current $15 per hour to $20, with annual increases of $1.25 per hour. Likewise, the “service rate” for tipped workers would increase from $6.75 to $12 per hour. Do these figures make sense and seem reasonable, or as critics contend, are they too steep too quickly?
The determination of whether the increases are too rapid depends on whose perspective you view the issue from. Employers are obviously going to resist any increase in costs that impinges on their profits. However, $15 per hour translates to an annual salary of $31,200, assuming a 40-hour workweek and payment for 52 weeks. This amount seems barely sufficient for most of us to manage household expenses. The proposed adjustments to the minimum wage must be considered in light of the overall inflation and cost of living in Massachusetts.
The School of Hospitality Administration’s Distinguished Speaker Series, featuring Saru Jayaraman, is Wednesday, February 7, at 4 pm at the Center for Computing & Data Sciences, 17th floor, 665 Commonwealth Ave. Find more information and register here.