Listen to this articleThe basics:
- 89% of NJ tipped employees prefer current system over flat wages
- 82% say eliminating tip credit would reduce earnings
- Survey underscores potential economic, employment impacts of changing tip laws
A newly released survey shows that the majority of New Jersey’s tipped workforce opposes legislative efforts to dismantle the current tip wage system.
After engaging nearly 400 servers, bartenders and other tipped employees at full-service restaurants across the state over the summer, the New Jersey Restaurant & Hospitality Association found:
- 89% prefer the present system over a flat wage model
- 79% said it works well and should not be changed
- 83% report earning $20–$40 per hour with tips and base wage combined
- 82% believe eliminating the tip credit would reduce their earnings
Respondents emphasized that tipping not only has high earning potential but also provides vital income flexibility. And, many expressed concern that axing it would lead to mandatory service charges and smaller tips, according to the statewide trade association.
Commenting on the results, NJRHA President and CEO Daniel Klim said, “This survey delivers a clear message from the very people most impacted – tipped employees want to preserve the system that lets them earn well above minimum wage. Lawmakers should listen directly to these workers before pursuing changes that could put their livelihoods at risk, especially when they did not ask for this change.”
A tipping point
Under New Jersey law, tipped employees receive a tip wage of $5.62. If their tips combined with the tip wage fall short of the state minimum wage of $15.49 per hour, employers must cover the difference.
As a result, the current system ensures that every tipped employee must legally make at least the state minimum wage, NJRHA noted.
Last spring, the statewide trade association mobilized more than 150 tipped employees and employers to testify before lawmakers in Trenton against a proposal to eliminate the tip wage. Ultimately, the measure was changed to a discussion-only hearing before an Assembly panel and no movement occurred.
By the numbers
Under New Jersey law, tipped employees receive a tip wage of $5.62. If their tips combined with the tip wage fall short of the state minimum wage of $15.49 per hour, employers must cover the difference.
Assemblywoman Verlina Reynolds-Jackson, D-15th District, sponsored the bill. The measure calls for phasing the tip credit down before eliminating it entirely in 2030.
Supporters argued that it would ensure fairer wages for tipped workers. Meanwhile opponents – including restaurant owners, industry workers and business groups – expressed concerns that eliminating the tip credit would lead to higher labor costs and potentially result in increased prices or reduced employment in the hospitality industry, the New Jersey Monitor reported.
‘A colder, transactional model’
“We don’t have to guess what happens when policies like this go into effect – we’ve already seen the fallout. In Washington, D.C., restaurants were forced to cut shifts, reduce staff and replace tipping with mandatory service charges just to keep their doors open.
“Tips dropped. Servers started earning less – not more. Dozens of long-time restaurants shut down, and the warm, personalized dining experience diners love, was replaced with a colder, transactional model,” Klim said.
Cory Wingerter, owner of The Tiger’s Tale in Montgomery, said his priority is to protect employees who would experience significant impacts if tip wage changed.
“I simply could not absorb the increased labor cost that would happen instantly if tip wage was eliminated,” Wingerter said. “I would be forced to raise menu prices, cut shifts and likely eliminate jobs just to keep the doors open. Many of our employees have been with us for a long time and this change would be devastating.”
Melissa Gourley, a longtime worker in New Jersey’s service industry, said her dream of becoming a nurse would not be possible if the current tip wage system was eliminated.
“I make nearly twice as much bartending as I did working in the ER. The only reason I can pay for nursing school and work toward becoming an RN is because the tip wage system allows me to earn well above minimum wage,” she said.
Pressing pause
In Washington, officials paused the rollout of Initiative 82. The voter-approved measure gradually eliminates the tip credit system and raises the base wage for tipped workers.
Lawmakers said they needed more time to assess the economic impact on restaurants amid ongoing inflationary concerns, rising costs and economic uncertainty.
Of the 50 eateries that closed this year in the capital city, owners cited higher labor costs linked to Initiative 82. Others reported cutting hours, laying off staff or halting hiring altogether, according to regional trade group Restaurant Association Metropolitan Washington.
In the U.S., there are a few states – such as California, Nevada and Alaska – that require full minimum wage for tipped workers with no tip credit. Others, like Illinois, New York, Massachusetts and Connecticut, are trying to phase it out. However, they face strong pushback from the restaurant industry over higher cost concerns.
NJRHA’s survey is available to members of the group. Non-members can request a copy by contacting NJRHA Vice President of Public Affairs Amanda Stone at [email protected].
According to NJRHA, it administered the questionnaire online with assistance from Pittsburgh-based research and consulting firm CorCom Inc.
