Republicans on Arizona’s House Commerce Committee—with no help from Democrats—voted this week to pass an amended version of SCR 1040—now titled the Tipped Workers Protection Act—which would give Arizonans an opportunity to affirmatively defend restaurant and other hourly workers from an effort that will destroy the current system that rewards hard work and quality service. If it secures final passage, the proposal from Arizona House Republicans would refer to the ballot a measure to preserve some semblance of a tipped minimum wage in the State Constitution. While this roundabout approach is not ideal, it’s made necessary by Governor Katie Hobbs’ insistence on vetoing even the most sensible pieces of legislation.
SCR 1040 is also necessary in the face of yet another ill-conceived ballot proposal to drastically increase the state’s minimum wage. Activists are pushing forward, despite the harms of similar increases being well-documented and affecting more than just pay. A 2021 study identified the harms to employees in the form of reduced hours, lower eligibility for benefits and less consistent schedules. For instance, every $1 increase in the minimum wage resulted in an average decrease of each worker’s hours by more than 20 percent. A review of similar research from the Bureau of Labor Statistics noted:
Facing increased labor costs, firms may buy cheaper office equipment or offer fewer training opportunities. Firms may also replace lower skilled, less-educated workers with higher skilled, more educated workers. If firms were to hire a greater number of high-skilled workers, low-skilled workers would have more difficulty finding work. Firms might also have the option to replace people with technology.
Look no further than Arizona’s neighbor California where fast food is “about to get more expensive” under a new higher minimum wage targeted at the industry. For every $1increase in the minimum wage, a restaurant must raise prices 2 percent to make up for the additional cost. Even more important, the increased costs are passed on to consumers, and these increased costs fall disproportionately on low-income households, erasing gains from wages.
The well-documented harm of minimum wage increases aside, SCR 1040 specifically deals with the minimum wage for tipped workers, which is slightly lower than the regular minimum but still guarantees workers earn at least the regular minimum wage if the difference is not made up in gratuity. Restaurant workers and customers prefer the system that allows customers to reward exceptional service and hard work with a gratuity that far exceeds what a server might earn on just minimum wage. SCR 1040 would allow Arizonans to vote to preserve this system.
Some cities have upended this system over the past few years, notably, Washington, DC. DC’s experience tells the story for how that’s going: “Live in DC? Get ready for 20% service charges when you eat out.” In fact, the DC City Council recently had to clean up the mess the city’s program created because overzealous activists sued restaurants that charged fees due to the higher costs. The New York Times calculated that dining out prices rose 64 percent more in DC than nationally. How did workers do under the new system? “Most workers said they supported the initiative. But many were unhappy at how it has played out,” the Times noted. While some workers saw pay increases, other workers’ paychecks shrunk due to decreased tipping and reduced hours. The Times also points out that customers are more confused than ever.
Without SCR 1040, and if activists get their way, this experience could be coming to an Arizona restaurant near you.