A new survey by the NYC Hospitality Alliance reveals that 95% of New York’s restaurateurs oppose the proposed legislation to abolish the tip credit system. This system currently allows restaurant owners to pay their tipped staff less than the minimum wage, balancing their income with customer tips. The survey, involving 879 restaurants, indicates a deep concern among business owners about the potential repercussions of such a change.
Andrew Rigie, the executive director of the NYC Hospitality Alliance, emphasized the reliance of New York’s restaurants and bars on the tip credit, warning that the elimination of this system could jeopardize small businesses and jobs, and lead to increased dining costs in New York.
“There’s no reason for the state’s elected officials to upend the working model of New York’s restaurant industry and put small businesses and jobs on the chopping block, while making it much more expensive for New Yorkers and visitors to dine out in the Empire State,” Rigie said.
According to the survey, 97% of restaurant owners expressed extreme or moderate concern over the proposal, with 88% believing it would be catastrophic for their businesses.
The proposed legislation, pushed by Assemblywoman Jessica Gonzalez-Rojas (D-Queens) and Sen. Robert Jackson (D-Manhattan), aims to abolish the “tip credit” and set a $17 per hour wage by 2026 for tipped workers in the city, Long Island, and Westchester. Gonzalez-Rojas argues that the current system fosters inequities among workers and contributes to a high rate of sexual harassment claims in the restaurant industry.
The Hospitality Alliance’s report highlights the financial strain restaurants are already facing, including post-pandemic inflation and the impact of remote work. Eliminating the tip credit, the report estimates, would increase the cost of employing a full-time tipped worker by about $12,000 annually. Under the current law, restaurant employers in NYC can pay a base wage of $10.65 per hour if when combined with tips, it equals or exceeds the $16 minimum wage.
Many restaurant owners are contemplating drastic measures in response to the potential change. The survey found that 76% would increase menu prices, 42% might eliminate tipping entirely, and two-thirds would consider reducing their workforce—a situation already observed in the District of Columbia after ending the tip credit. More than half of the restaurateurs surveyed even consider the possibility of closing their businesses.
The Fair Wage Coalition, however, supports the bill, arguing that ending the subminimum wage for tipped workers would benefit both employees and owners. Saru Jayaraman, president of the One Fair Wage coalition, stated that this legislation would address the restaurant worker shortage and announced a $50 million recovery loan program to assist restaurants with any short-term increased costs.
