Are you ready? Are you need more time?
No. We're ready. Sometimes my kids tell me mommy buy me
something. Then I go, okay, not today, because mom not
make money today.
Hello, ladies. How are you?
Good. How are.
You? Lupe is a server at Cisco's Restaurant, Bakery
and Bar in Austin, Texas, one of many workers around
the country who makes the federal minimum wage for
tipped workers, which is $2.13 an hour, a rate that's
been in place since 1991.
There's no real economic theory that came up with
$2.13 an hour.
It's just no good reason that we haven't moved away
from that.
There are about 5.5 million tipped workers in the United
States.
Nobody's making you work as a tipped wage employee.
While restaurant owners across the country might want
to be paying their employees higher wages, some, like the
owner of Cisco's here in Austin, Texas, say they just
simply can't afford to do so.
At the end of the day, if we were to increase our minimum
wage internally, we have to then pass that off to the
customer, which then likely probably tips less.
Wages across the economy in the lower third of the
economy have been artificially suppressed for
way too long.
If you want people to work in these jobs, you have to
pay them and not force them to rely on tips.
While some states have set their own minimum wages, and
the minimum wage for tipped workers is higher than the
federal requirement, it's often not a living wage.
43 states have a lower minimum wage for tipped
workers than non tipped workers, meaning the
percentage you're tapping on that tablet might not just be
a thank you great job.
But instead what brings that worker to making minimum
wage?
The tip should be what a tip was always meant to be a
small amount on top, a gratuity.
Matt Cisneros grandfather, Rudy Cisneros, opened Cisco's
Restaurant, bakery and Bar in 1950, in Austin, Texas,
one of 16 states that adhere to the federal minimum wage
for tipped workers.
Here's how it works.
The federal minimum wage is $7.25 per hour, but if you're
a tipped worker, it's $2.13 per hour.
Also referred to as the sub minimum wage.
The difference between the two $5.12 is called a tip
credit. If a worker doesn't receive $5.12 an hour in
Tips, the employer is responsible for paying them
that difference. That's the law.
Most consumers have no idea that every time you tip in a
restaurant in most states, it cuts against the worker's
wage rather than being something on top of the wage.
Lupe, who's been working at Cisco's for ten years, makes
the federal sub minimum wage of $2.13 an hour.
She works alongside her mother in law and cousin.
She told us while there are days when she makes only $30
in tips, she typically makes about $200.
It's difficult knowing if somebody goes home not making
a lot of money. You can have a good day at work being a
banker and you can have a bad day at work.
Same goes for a pharmacist or anyone's.
Wages are fluid, but I think if you work hard, you're
going to get tip more.
Cisneros says when he and his partners took over the
restaurant in 2017, it wasn't profitable.
It wasn't something that we bought being like, oh, we've
got some honey hole here. We bought history that we knew
continued to live.
We're here to ensure everybody has a very fair,
livable wage and can go home to their families and look in
the eyes and be proud of where they work.
Between 2018 and 2022, annual revenue nearly doubled.
Their goal is a 10% net profit margin.
10% is a lot higher than a lot of other restaurants.
Why not raise the wage?
There's ones that we don't get anywhere near that
margin. It's a little bit more of chess that we're
playing, so our revenue is not what a lot of restaurants
are, right? So if you're at a barbecue place, you're
probably doing $10 million a year in revenue, like, well,
they might operate on a lower margin.
They still probably net a lot more than we do.
We have to ensure that our margins are around where they
are. Otherwise, like this business is not functional.
In 2022, labor alone accounted for nearly half of
the restaurant's total costs. Cisneros told me he
and his partners have never taken out a salary from the
restaurant. He is a full time job as the founder and
president of Backyard Ventures and Advertising
Partnerships business.
This is to feed all of the families that work within
these walls and continue the lineage of the restaurant
operating. While we'd love for everyone to make as much
as possible with a guaranteed minimum, the end
result is the domino effect of having to raise prices
across the board, which then pushes some friction or
resistance to your customers.
As of 2023, only seven states have eliminated the sub
minimum wage.
Saru Jayaraman is the founder and president of One
Fair Wage, an organization seeking to end all sub
minimum wages in the country and increase the
sustainability of wages and working conditions in the
service sector.
These states actually have the same or in many cases,
higher restaurant industry business growth, small
business growth rates, job growth rates in the
restaurant industry, people of color owned business
rates, women of color owned business rates and tipping
averages than the rest of the country.
The nation's third largest city and foodie capital,
Chicago is the latest to make the move.
It's complicated, and so is the definition of a tipped
worker, an employee engaged in an occupation in which
they customarily and regularly receive more than
$30 a month in tips.
Nowadays, that's a lot of people, and consumers aren't
responding positively to this shift.
In the second quarter of 2023, tipping at full service
restaurants fell to the lowest level since the start
of the pandemic.
I don't think people realize how impactful that tip can be
solely because they're so accustomed to tipping
everywhere now that's going to hurt businesses, that's
going to hurt people who actually are working really,
really hard and busting to pay for their families
because you tipped down the street at your doctor's
office or something random like that.
Every day, Cisco's workers report their tips to
management. That's how the tip credit obligation is
monitored. While that may work here, there's no
governing body making sure that happens everywhere.
Nobody ever stops the clock and says, okay, let's sit
down over all of their different and varying shifts.
How much did they earn in tips?
From 2010 to 2019, more than 85% of investigated full
service restaurants and bars had some type of a violation,
and 1 in 10 violated a Fair Labor Standards Act law which
establishes minimum wage, among other things.
During those years, the government recovered nearly
$115 million in back wages for all violations across the
two industries and about 114 million in back wages for
FLSA violations.
Specifically, it's risky to go to your boss and say you
owe money. Is anybody going to do that?
Because now you're going to get on the really less
lucrative shifts.
Andy Puzder is the former CEO of CKE restaurants.
While there, in 2017, the company was slapped with a
$1.45 million fine for failing to pay minimum wage
in LA. He was also. A former President Trump's nominee for
labor secretary, but withdrew from consideration
in 2017 following bipartisan opposition.
He says the fine was a payroll mistake and employees
were paid back the owed wages. While fast food
workers are not tipped employees, he doesn't believe
there's a need to raise either minimum wage, a belief
he's been public about for years.
Nobody makes $7.25 an hour.
I'd be surprised if half a percent of the employees in
the United States make the federal minimum wage.
I'm up in Northern Michigan right now, and I drove by a
McDonald's. The sign in the window is $21 an hour
minimum. Wages have become irrelevant because we've had
such incredible growth in wages, driven by market
demand for employees.
In 2022, more than 1 million workers made the federal
minimum wage of $7.25 or less.
This point in time is also an anomaly.
The world just went through a global pandemic.
What happens when the market changes and there's less
competition for these workers?
We don't know how long this is going to last.
We know the next recession is always on its way.
We don't know when it's coming, but I would say we
should really increase the minimum wages right now, lock
in the gains that they have made through this Covid
reopening.
Those in the service industry were also some of the workers
most affected by the pandemic.
There was no such thing as work from home.
Not only was there increased harassment, but also a higher
risk of getting sick.
68% of those who died from Covid 19 during the first
year of the pandemic were adults employed in labor
service and retail jobs that required on site attendance
and prolonged close contact with others.
Hundreds of thousands switched industries, and many
of those who stayed demanded higher wages.
For the first time since emancipation, millions of
workers have walked off the job out of the restaurant
industry are refusing to come back during the
pandemic. So many of them realize that getting a sub
minimum wage doesn't work for them.
Meanwhile, most tipped workers are minorities, about
70% are women, and more than 40% are people of color.
They struggle with three times the poverty rate of
other workers and experience the absolute highest rates of
sexual harassment.
Tipping versus not tipping, which would be a simple
conversation and not unpleasant at all.
Just like in Hulu's The Bear, at the end of the day, how to
pay employees is really up to those running the
business. Some get creative, like at Loca d'Oro, also in
Austin, Texas. When Adam Orman and his partner Fiore
Tedesco opened this place in 2016, paying just the minimum
wage wasn't an option.
A 20% hospitality charge is included on every check.
The tip minimum wage comes from a legacy of slavery.
That alone is enough of a reason to know that this is
not something that we want to have anything to do with,
but that legacy has kind of infected the way tipping
exists now as well.
There's a dimension to tipping, where tips are more
dependent on the sex, gender, and race of your
server than they are on the quality of service at this.
Italian inspired neighborhood restaurant, employees who
would typically be tipped workers are paid 17 to $28 an
hour based on experience and skill set.
It's so relieving.
Being able to come into work and realizing that my
livelihood is not dependent on the generosity of people
who decide to eat out.
At restaurants, Evan Gosling worked at in the past.
He made $2.13 an hour, he says.
With the cost of living in Austin, it's not sustainable.
I wouldn't be able to live here with a child.
It's not dependable, depending on how busy it's
going to be that day and if there's weather involved and
how much business you have, you just don't make any money
that day and then it gets subsidized by your other
days. So if you have a really good day, you're
actually paying yourself back.
On the slow days.
We don't think that 213 is a wage that anybody in Austin,
Texas should be making.
If you have a good time here, if Maddie makes good
drinks, by all means leave a couple bucks.
But that is not how she is getting paid.
That is not how anybody in this restaurant is getting
paid. They're making a proper hourly.
No matter what happens during the course of the
night.
I think that's great.
The charge also ensures employees receive membership
to a direct primary care clinic, subsidized mental
health counseling, and paid time off.
Which is nothing I've ever seen in the restaurant
industry.
Corner.
Behind.
And then the tip is a tip.
It's optional.
And then it's distributed to the staff based on hours
worked. That sounds like a lot of work.
It's not. This was how we opened.
We knew that we couldn't just raise prices and try and
convince people that the tip was included, because there
were too many headwinds.
In 2022, the restaurant's net profit margin was -1%.
They're projecting that number to be more like 2 or
3% in 2023.
That includes both partners salaries, which are roughly
10% of the restaurant's annual revenue.
Our margins are extremely thin.
Labor is the one that we've chosen.
Tend to spend more on food is the one that's hardest for
us to wrangle, and those are the ones that we can't get
around. Heavy cream went up 140% from one pay period to
the next. And our ordering, which is bonkers.
Credit card fees have gone up.
It's hard. We are kind of a break even model in.
Terms of just supporting your family.
Is this all worth it?
I did not think that it would be like this.
I knew that it was going to be hard, but I didn't know
that it was going to be hard in this way, and I didn't
know that I was going to spend as much time being a
labor advocate as I am, but that makes it incredibly
worthwhile.
Orman and his employees say this wage model is about so
much more than what's on the surface.
It encourages a greater team.
Effort brings.
Everyone together.
It's a well-oiled machine.
We're all working for the same thing.
It doesn't matter if my position is bartending.
I'm so happy to turn around and run food to a table.
But they acknowledge it's not for everyone.
We've gotten feedback, people thinking that it's sneaky,
people thinking that we are going behind their back to
charge them for something that they didn't consent to.
However, we try to be as transparent as possible.
It's clearly stated on the restaurant's website menu,
and each check that a 20% hospitality charge is
included. If you consider yourself a foodie, you know
the name Danny Meyer, founder and executive
chairman of Union Square Hospitality Group.
In October 2015, he announced the elimination of
tips at 13 of his New York City restaurants.
And these are restaurant tabs that are $500 or $1000 or
more.
Then in 2020.
We actually reverted.
And so now our dining room members do accept tips.
Meyer is just one of many restaurant owners who
eliminated tipping over the years, and since then, nearly
all have gone back to tipping.
A lot of feeling that you've taken out the wind of my
sails of being a server.
I can I can make a really great income.
Last only because of my tips as a bartender or as a
server.
Diners objected to the higher prices, and an estimated 30
to 40% of servers quit, often going to competing
restaurants that kept tips.
That's why Cisneros believes his staff, too, is better off
with tips.
Loyal customers that come here.
They do take care of the staff because they know that
they're really, really good people who've worked here for
a long time. We've been around for 70 plus years and
it's somehow worked for that long, so we're not stopping
because of that reason.
While it may hurt, we're going to do everything we can
to make sure these people, which we consider family,
make money.
And I get that this is maybe the one place where customers
feel like they still have control over their
experience. You don't get to decide how much the the pilot
makes or the flight attendant makes.
When you're when you have a bad experience on a on a
plane, some might.
Say there's an obvious fix.
Raise the minimum wage so that no one, not just tipped
workers, have to rely on tips, and tips can simply be,
well, tips.
One of the reasons why these tablets then are swung around
in your face and asked, do you want to leave a tip?
Are because a lot of these workers are still low wage
workers, even if they're making a minimum wage in a
place that has a higher minimum wage.
If we don't.
Want to see tipping in every environment we walk into, we
have to get rid of this sub minimum wage.
It's the only way to end the incentive for employers to
introduce tipping into any and every environment in
which we purchase something.
Others don't believe.
Raising the minimum wage is necessary.
Because we've had such incredible growth in wages
driven by market demand for employees.
I would recommend very strongly that with the 9
million job openings that we currently have in the United
States and the strong demand for employees, they go to a
different job. It's not always the government's job
to solve everybody's problem.
It's not as easy as that.
And it's certainly easier for me as a white man to go
in places, have more interviews and get hired
places than other people that I know who aren't.
Those opposed to raising the minimum wage argue it would
cause employers to cut the number of hours each employee
works to compensate, and consequently have them
actually making less.
They're also worried a raise will eliminate jobs.
A worker would have to work a lot less if they're going to
earn $15 an hour versus $7.25 an hour to actually
come out on the losing end of that.
As long as you raise it to a point where it doesn't kill
entry level jobs, you're okay if you get ahead of the
market to the point where a minimum wage is killing jobs
for people that are trying to enter the labor force,
well, now you're being counterproductive.
Restaurant owners have such thin margins.
Where would this money come from?
They can raise prices, but the price increases of
minimum and sub minimum wage increases are much less than
the actual increases.
You hear a lot. If you increase the minimum wage by
30%, you increase.
Prices by 30% in restaurants.
Well, that's not true.
There are smart ways to do this basins and making sure
that we want businesses to stay whole.
According to advocates, if the tipped minimum wage was
raised to $15, the price of food would only increase by
$0.25 a day for the average American household.
They believe the benefits will outweigh the 25 cent
increase. Economists say what matters most is the
overall cost benefit analysis, and that what the
country needs is a slow and steady reform process.
No drastic changes.
It's important to remember that there are costs to not
changing our norms too far.
Too many workers simply can't meet basic needs.
That has a cost.
If you increase the wage, they spend that money that
becomes a stimulus.
Americans interested in this debate should get involved.
Contact your public officials and vote.
And in the meantime, educate yourselves and don't make the
server standing behind the tablet out to be the bad guy
or person.
Please understand how undervalued our employees
have been for so long.
These are real human beings that are going home dealing
with things the same way you are. Ultimately, I really
want all of our staff to make as much money as they
can. The goal here is to continue to grow, but not
have to charge people an arm and a leg to come have a
really good meal. Continue to support your small
businesses and your local businesses because that's the
heart of this city. And I think if we do that, then
things fall into place.