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Editorial: Cut pay means increased welfare

In 2008, a survey of restaurant owners in Minnesota found that the average server earned $15.43 per hour in wages and tips. Some earn a lot more than that, of course. And others — think of the person who tops off your coffee in your favorite small-town diner — make far less.

All servers would likely experience a pay cut if GOP gubernatorial candidate Tom Emmer has his way. On Monday, he said he supports legislation that would grant restaurants an exception to the minimum wage law for employees who receive tips.

Minnesota is one of seven states that prohibit using the tip credit to reduce the minimum wage. Others are Alaska, California, Montana, Nevada, Oregon and Washington.

For restaurants with gross revenues above $625,000 per year, the minimum wage in Minnesota is $6.15. Restaurants with smaller incomes must pay their servers at least $5.25 per hour.

Emmer’s proposal isn’t new. In 2007, Gov. Pawlenty vetoed an increase in the state minimum wage because the proposal didn’t include the tip credit.

The idea has some merit. The Minnesota Department of Labor and Industry reports that 63 percent of minimum-wage workers in Minnesota receive no additional pay in the form of overtime, tips and commissions. One could certainly argue that it’s unfair to apply the same minimum-wage rules to the 37 percent who, on average, supplement their pay with an extra $10 per hour in tips.

Emmer singled out the Eagle Street Grille in St. Paul, where three servers reportedly each earn more than $100,000 in wages and tips each year.

Furthermore, if restaurant owners were allowed to pay lower wages, Minnesota might become a more attractive destination for restaurant chains that are looking to expand.

But the inherent flaw in Emmer’s proposal is this: Servers at the bottom end of the total take-home pay scale would pay a steep price if the “tip credit” were applied. A server who earns $15 per hour would earn just $11, a 27 percent pay cut. A $31,000 annual income would shrink to $23,000. That’s a life-altering change.

In other words, Emmer’s proposal is like a regressive tax: The more money a server earns, the less they would be penalized by it.

Do we really want to take such a step at a time when many low-income Minnesotans are struggling to pay rent and put gas in their cars? Keep in mind that most of the money such people earn doesn’t sit in a bank or get invested in the stock market. It’s spent immediately, generating sales tax revenue and helping to support other jobs in Minnesota.

Slashing their pay would simply increase the number of people who would need public assistance to make ends meet. With Minnesota already facing a $5 billion budget deficit, that’s the last thing we need.

— Rochester Post-Bulletin, June 7