In an election year there are an abundance of legislative proposals that appeal to the heart rather than the head. A recent example is Sen. Tom Harkin's Rebuild America Act. Among other things, the Iowa Democrat wants to raise the minimum wage by 220% for employees who receive tip income, such as waiters and waitresses. 

Such a large increase will be crippling in an industry where labor costs consume one-third of sales revenue. Nonetheless pro-union advocacy groups such as the Restaurant Opportunities Center promote Mr. Harkin's bill (and similar state efforts) with the emotionally compelling myth that tipped employees earn little more than $2 an hour.

Here are the facts. The federal minimum wage for employees who earn tip income is $2.13 an hour. The Labor Department permits their employers to pay the lower base wage so long as the employee earns at least the full federal minimum wage of $7.25 when their tips are included. If tips fall short of that amount, employers kick in the rest. According to recent Census Bureau data, the average hourly wage for a restaurant employee earning tip income is $11.82. Top earners can collect $24 an hour or more. The reality is that tipped employees don't just survive on tip income - typically, they thrive. It's not uncommon for even part-time table servers to pull in upwards of $40,000 a year.

Despite this, more than 20 states have shrunk the portion of tips that restaurants can count as income. Seven, including California, have eliminated it entirely. That's placed big burdens squarely on the backs of restaurants - and those burdens trickle down to employees when they can't be offset through higher prices. Many restaurants there have stopped hiring busboys and started assigning larger sections to fewer servers. Employees get fewer opportunities to provide customer service, which means customers get fewer opportunities to reward it. Trinity University and Miami University economists have already shown that for each 10-percent increase in the mandated wage rate for tipped employees, work hours have dropped by more than 5 %. They estimate that the combined loss of employee hours would translate to the equivalent of over 447,000 full-time tipped jobs. If passed, this new generation of proposals will force restaurants to implement one of a few undesirable alternatives. Some will do away with tips altogether and move to a European service-charge model, where the potential for a $20-an-hour tipped position will vanish. Others will continue the march toward more customer self-service instead of raising prices, creating an industry with less opportunity for servers.  

Sen. Harkin's proposal follows the progressive textbook method for raising wages: Just pass a law that makes employers pay more. Yet whether it's an increase in the minimum wage or an increase in the less-familiar tipped wage, the intended good will not outweigh the necessary consequences that not only hurt the employer but the employee the law was designed to aid in the first place.

 

Read the full NRA and Wall Street article or contact Flores Financial Services at 619-588-2411 for more information.     

Happy Birthday Flores Financial Services!! We are celebrating our 10 year anniversary as FFS! We can't believe how time has flown by and how much we have grown in the past 10 years. We couldn't have achieved what we have today without our loyal customers and amazing FFS team! We would like to sincerely say THANK YOU to all of our clients for entrusting us to serve you as a dedicated part of your business success.
Since becoming owner and president 10 years ago, Greg Flores took an already well established business (Lowell Business Services) with 20 years of history and experience and grew the company into an even stronger force in the outsourced market. He enabled us to offer our clients with outstanding customer service and a more focused expertise in not only bookkeeping and payroll but human resources and consulting as well. Since 2002 we have grown from a staff of just about 10 to over 75 bookkeeping professionals. The company has achieved the majority of our current customer base by client referrals, which is a true testament to the quality service produced by the Flores Financial team.
It has been an exciting past 10 years and we look forward to continued growth and success with each upcoming year where we hope we can continue to build the legacy and value of Flores Financial Service for years to come.

This month Flores welcomes new clients, Vintana, Cafe Madeline, Vagabond, Bosch Baking and 35 new Sprouts stores. We are looking forward to providing each with excellent service. We also want to recognize our FFS All-Stars for April and May, Nadia Rezai and Tracy Erni. Nadia is a vital part of our restaurant division and provides amazing customer service to each of her clients. In addition she has stepped up to help her fellow FFS team as a key trainer in our partnered CTUIT platform. Her work along with her positive attitude is a much valued role in our office. Tracy has been with FFS since 2005 and has been an integral part in the Sprouts division ever since. Her attention to detail is spot on. She truly cares about doing a good job and is always looking for ways to improve efficiency and accuracy. Congratulations ladies and thank you for your hard work!