NJBIA opposed legislation on Thursday that would increase the minimum wage for tipped workers by eliminating the tip credit in New Jersey.
Bill A-5433 (Reynolds-Jackson, D-15) was before the Assembly State and Local Government Committee, which held the bill for further discussion.
“There is significant economic research showing how tip credit elimination results in substantial losses for both restaurant employers and their employees,” said NJBIA Vice President of Government Affairs Elissa Frank, ,who testified in opposition to the bill.
“Data shows that tips decrease when tip credits are eliminated, and hourly wages are increased. They show that states with no tip credit have the lowest tipping percentages in the nation.
“Further, recent conversations we’ve had with members who would be greatly impacted by this bill echo those very real concerns of higher costs resulting in job cuts, including big increases in payroll taxes, and even restaurant closures. These are real-life consequences for both employers and workers to consider with this legislation.
“From a strictly business standpoint, another bill to burden employers with already slim margins is exactly what we don’t need in New Jersey right now.”
The bill amends New Jersey’s current minimum wage law to phase out over five years the credit provided to job creators who employ employees who receive gratuities or tips.
According to the language of the bill “the eventual elimination of the tip credit… will require that the employer pay the full amount of the minimum wage without regard to any amount of tips received by the employee.”
“Ending tipped wages is a recipe for disaster,” said Denise Beckson, vice president of human resources at Morey’s Piers and a member of NJBIA’s Board of Trustees. “It will hurt restaurant workers, owners and the general public. This is a no-win proposal that will negatively impact those it seeks to help.”
A 2022 report by the Employment Policies Institute found the following projections resulting from tip credit elimination:
- Every $1 increase in the federal tipped minimum wage could cause a 6.1% decrease in restaurant employment and a 5.6% in tipped restaurant employee earnings.
- The U.S. could lose as many as 801,224 jobs in the restaurant industry under a $15 minimum wage with no tip credit, with 466,040 of those jobs belonging to tipped restaurant employees.
- Full-service restaurant employees across the U.S. could lose nearly $2.2 billion in total annual earnings due to a $15 tipped minimum wage.
“While this bill presumably aims to empower the tipped worker, most will make less and/or have fewer jobs to choose from,” Frank said. “Couple that with added costs for employers and their customers, this bill seems like a lose-lose-lose.”
