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MINIMUM WAGE: The Sham Report

The main research used to justify minimum wage hike is full of it.


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I support raising minimum wage in San Diego. I’d like to see it be closer to San Francisco’s $15/hour. The specific question behind this series is: Should that raise include waiters and waitresses at restaurants where they make upwards of $15, $20, $30, even $40 an hour with tips? Is it fair to make small business owners (restaurant owners) pay them each an additional few thousand dollars a year? Under Council President Todd Gloria’s ordinance, they will be forced to.

In my research, I discovered a huge, misleading piece of this debate. When it comes to the restaurant industry, the main research cited by supporters of Gloria’s minimum wage ordinance is a complete, utter sham. Under even basic scrutiny, the numbers fall apart. And yet it's being presented to the public as fact.

I'm talking about this research, conducted by the Employment Development Department. One of Gloria's main partners in the minimum wage proposal—the Center on Policy Initiatives—has repeatedly pointed to this report when asked how they justify forcing restaurants to give a raise to employees making far above minimum wage.

What’s the report say? That waiters and waitresses in San Diego only earned an average of $9.08/hour last year—including tips.

Oh, damn. Give those people a raise!

Only, small problem. No reasonable person would look at this report and say, “Yeah, sounds about right.” You don’t have to be an economist or statistician to detect the problems. Common sense will do just fine.

The main problem? At the time of this report, minimum wage was $8 an hour. So according to this report, the average San Diego waiter or waitress averages a paltry $1.08 an hour in tips.

If you believe this, then you have to also conclude…

1. SAN DIEGO WAITERS ONLY SELL SEVEN DOLLARS OF FOOD AN HOUR

To make only $1.08 an hour in tips, a waiter or waitress would have to sell no more than $7.20 of food an hour. (This assumes San Diegans only tip 15%, even though national average is closer to 18%). You show me the restaurant where each waiter sells less than $7.20 of food an hour, and I will show you a restaurant selling artisanal street drugs out the back. Their most loyal customers would be bankruptcy attorneys.

2. SAN DIEGANS ARE THE WORST TIPPERS IN THE COUNTRY—BY A LONG SHOT

According to this national report from the Bureau of Labor Statistics, waiters and waitresses in the rest of the country average $10.04 an hour—a buck more than their San Diego counterparts. You’re a real tightwad, San Diego. Wait, no. You’re a legendary tightwad, San Diego—because this number includes 43 states that have “tip credits.” In those states, restaurants are only required to pay tipped employees $2.13 an hour. So that means the average American waiter earns about $8/hour in tips, while the EDD has concluded that San Diego waiters make $1 an hour. Actually, most tip credit states pay their servers between $3-$4 an hour. Even at $4 an hour, the average American waiter earns about $6 an hour in tips. That is six times what the EDD says San Diego waiters earn. Yep. According to the EDD, diners in the rest of the country tip about 600% more than San Diegans do.

3. COFFEE SHOP WORKERS MAKE MORE MONEY THAN RESTAURANT SERVERS

According to the EDD report, a barista in San Diego makes $10.69 an hour—a full dollar and change more than a restaurant waiter or waitress. I recognize that designer coffee isn’t cheap. But the only way baristas would earn more in tips than restaurant servers is if they started hand-whipping Chateau Lafite Frappuccinos at your table. Ask your hospitality industry friends. It simply doesn't happen in the real world.

I contacted the Center on Policy Initiatives. I pointed out the bad math and asked if they’d still stand by the report. “When people complain about this report, they’re often talking about the Urban Solaces of the world,” said CPI communications director Crystal Page, referring to the successful bistro in North Park. “They’re not taking into account the worker at Denny’s.”

So I called an area Denny’s. I asked a manager if her waiters and waitresses made about $1.08 an hour in tips.

“No,” the manager chuckled. “They make more than that.”

“I understand your skepticism,” said CPI research director Peter Brownell. “We hear these really big numbers about what waiters and waitresses make at some restaurants. But those are anecdotal stories. This [EDD report] is the best numbers out there for us to use.”

A report saying San Diego waiters and waitresses only average $1.08 an hour in tips—six times less than servers elsewhere in America—is the best numbers out there? We may need better numbers people.

I spoke with Todd Gloria about the report (full Q&A coming Monday). He made it very clear that this EDD report was not the only piece of information they used in crafting their minimum wage ordinance.

Fair enough. But the Center on Policy Initiatives—an organization Gloria’s office calls “one of the stakeholders the Council President worked with to develop the proposal”—has pointed to this report multiple times in the media. It has presented these numbers to the public as fact in an effort to win their support. The public, not having the time to look deeply into the math, is rightly kind of appalled that waiters and waitresses in San Diego are so impoverished.

After our interview, I sent a follow-up question to Gloria’s office: “I really want him to take a look at some of its claims and answer whether or not he feels the report rings even remotely close to real life. Straight answer, y’know?”

I got this response.

“Council President Gloria appreciates all credible reports and research that inform his decisions. As he shared with you previously, a wealth of information and testimony shaped the development of the measure, which resulted in an ordinance that is reasonable and the right thing to do.”

I agree Gloria’s minimum wage ordinance is a reasonable and right thing to do for San Diegans who make true minimum wage. As far as the report used to convince the public that restaurant waiters and waitresses need a minimum wage raise?

Not reasonable. A sham.

NOTE: I spoke with the EDD. They stand by the numbers in the report.

CORRECTION: In the original post, we had reported that coffee shop workers made $10.20 an hour. The correct wage according to the report is $10.69.

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