The minimum wage battle has reached a fever pitch around the city, prompting questionable behavior on the front lines – pencil stabbings? Hold it together, San Diego.
But the work behind closed doors has certainly had its own disputes. San Diego Magazine’s Troy Johnson has uncovered some shaky numbers in research cited frequently by supporters of the move to raise San Diego’s minimum wage to $11.50 an hour over the next three years. He calls the Employment Development Department’s report “a complete and utter sham.”
Johnson specifically takes issue with the conclusion that servers in San Diego collected on average about $9.08 an hour last year, including tips. The problem with that, he says, is that because minimum wage was $8 an hour at the time of the report, this would mean waiters were only taking in $1.08 an hour in tips. Johnson poked the Center on Policy Initiatives for the dubious numbers.
“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.
The Center on Policy Initiatives has been “one of the stakeholders the Council President worked with to develop” the minimum wage hike ordinance, according to Council President Todd Gloria’s office. Gloria said the department’s report was just one of many materials they used while creating the ordinance. The center, department and Gloria’s office all stand by the research.
These aren’t the only numbers flying in this thread. Here are some of the other stats and assertions that have gone under the microscope as both sides try to leverage facts and figures to support their cause.
• Supporters keep citing this stat that under the new ordinance, 170,000 workers would get a raise. But you should know a few things about that figure: It’s just a guesstimate based on U.S. Census data, many of those workers already make more than minimum wage and tens of thousands of workers will get a raise even if the San Diego measure is thrown out.
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There's a personal reminiscence in the U-T today by Thomas Sowell, reflections on his childhood and the minimum wage debate. Yeah, I know, "conservative" academics who are black are automatically suspect for being off the plantation, but it's well worth the read for some perspective and a reminder on rule #1 in these sorts of well-intentioned vote-getting schemes, the money to pay the increased wage has to come from somewhere. Unlike the federal government, these small employers can't print money.
And, please, spare me the "multiplier effect" rhetoric, you'll sound like an advocate for the convention center expansion or a new Chargers' stadium.
Thanks @Erik Bruvold for your thoughtful response. I think the disputes about the quality of the EDD data highlight the practical difficulties in implementing any kind of minimum "total compensation" or "tip credit" (even if it were legal under State law). If, as Troy Johnson argues, EDD data is not as accurate as we would like, how would the City know whether an individual employee's total compensation (including tips) is above the local minimum wage without doing a time consuming (for the City and the business) audit of payroll? These are the kinds of practical enforcement problems that we see if states that allow a so-called "tip credit." Employees are supposed to make a minimum based on total compensation, but employers often just "pay" the tipped minimum (which is $2.13/hr under Federal law). I put "pay" in quotes, because often it all goes to payroll taxes and employees get a pay stub for zero dollars net. Also in "tip credit" states, employers often pull tipped employees into other tasks that don't generate tips, but (illegally) still pay them only $2.13/hour for the whole shift.
I have to wonder this about the EDD report: What is their definition of a server? If it includes the thousands of people at the counters of fast food restaurants that hand you your food, it may be accurate.
@Bill Bradshaw Definition: Self reported by business owners. If you go to the bottom and look at the post I put up you will see why I think especially in the food service industry the EDD/BLS/SOC data has some real problems - especially in light of how the industry has seen the growth of "fast casual" formats (which probably depress wages - though definitely looking at their success - satisfy consumer preferences.
Now I tend to agree (shock and awe) agree with Doug Porter on this - not sure it matters for the current debate....only that if you want to understand this industry it would be really nice to really understand what is going on and why you have the disconnect between the full service establishment owners and operatorswho are saying one thing and then the data sources that are telling a different story. Yeah, it is what keeps economists up at night ;-)
@Erik Bruvold @Bill Bradshaw I agree that occupation it is reported by employers, but the debate is not about a category as vague as "server," it is about "waiter/waitress." Fast food employs "cashiers," which are not listed in this EDD document because this document only reports the wages of tipped workers. I doubt there is much confusion about whether fast food cashiers are "waiter/waitresses." I can see a certain amount of confusion about restaurants like Panera, where you order at the register and then someone brings your food to your table. But it that really a large enough share of the restaurants in the region to have a significant impact of the average (or median) earnings?
I agree with @Chris Brewster, that this is largely a distraction from the huge number of workers who earn no tips and need a raise to afford San Diego's high cost of living.
@Peter Brownell @Erik Bruvold @Bill Bradshaw @Chris Brewster Actually Peter Fast Casual is rapidly growing segment of the food service industry.
Unlike you I am not at all convinced that EDD has it right. The Waiter/Waitress wage is simply way too low to make sense if EDD is actually only getting full service dining.
Here is another chart that also gets at this issue.
As you can see, QSR is, BY FAR, the biggest segment of the market. And that speaks to your big point (as well as Chris Brewers'). But is also suggests that EDD is capturing a significant ("huge"?) number of QSR workers in its definition of Waiter and Waitresses that shouldn't be.
@Erik Bruvold @Peter Brownell @Bill Bradshaw @Chris Brewster Again, I think we are getting into the weeds here. But Erik, as you know "fast growing" doesn't mean large. Your statement that "QSR [Quick Service Restaurants] is, by FAR, the biggest segment of the market" doesn't bolster your argument about the significance of "Fast Casual." If one clicks on the links you posted, one sees that QSR is a different segment than "Fast Casual." Rather QSR is traditional fast food, and the Forbes link identifies chains like McDonald's KFC, and Burger King as examples of QSR. The second link shows that "Fast Causal" , while growing, currently reflects only 5% of restaurants nationally. So while it maybe be important in thinking about where the industry is going (continuing growth of untipped workers), it seems unlikely to have a large impact on industry wide estimates.
Again what this data shows is that food service segments (QSR and Fast Causal) that relies on untipped workers is both large and growing quickly, and if we are concerned about the current and future welfare of the food service industry's employees in San Diego, we should be concerned about the majority that earn low wages with little or no tips, rather than focusing all our attention on the exceptionally well-tipped Bali Hai waiters.
@Bill Bradshaw I was in Chile's last month in front of the Sports Arena. There was a device on the table allowing you to order directly from the menu, reorder drinks and pay your bill with a credit card. Is this the start of fast food restaurants eliminating servers and counter employees in anticipation of an increase in the minimum wage? The advocated of minimum "learning" wage increases should be proud of how they are increasing inequality of incomes between those who have jobs and those whose jobs have been eliminated. Unintentional or not!
@Erik Bruvold Erik, I am a bit disappointed in your response. You say you are interested in understanding the difference between the EDD numbers and the stories the restaurant owners tell, but when I make a substantive critique of your hypothesis, your response is to call me an "advocate" rather than address the point that I raised. Even if your hypothesis (that fast causal servers who get few tips are being included in employer reports of the waiter/waitress occupation) is correct, one could use it to build a case for or against minimum wage. I wasn't you debating as an advocate, but as a researcher.
@Peter Brownell @Erik Bruvold OK. But you were the one that said this topic was in the weeds....
But to clarify,
the SOC definition of Waiters and Waitresses is :"Take orders and serve food and beverages to patrons at tables in dining establishment." EDD estimates in May 2014 there were 28,000+ workers in that category.
In contrast, SOC definition of 35-3021 Fast Food and Counter Workers is "Perform duties which combine both food preparation and food service." According to EDD there were only 24,860 workers in the category....who make a wage GREATER than the waiters/waitresses. (22K vs. 20.8)
Thus the conundrum. EDD is telling us that fast food workers at the counter make MORE than waiters and waitresses....and that even though the QSR has 70% of sales they employ FEWER people than the segment(s) that involve taking orders at the table.
Again, my hunch is that EDD doesn't really have good data (at all) in this segment. As I said before, I am sure to the advocates on either side they don't care. But it remains troubling because the data violates common sense (why would you put up with running back and forth to a kitchen, carrying food, pouring water, writing down orders, ect. etc. and make LESS than a fast food counter worker? But that is what EDD's data would have us believe).
@Erik Bruvold You know that there are employees in the fast food INDUSTRY that are not in the 35-3021
"Combined Food Preparation and Serving Workers, Including Fast Food" OCCUPATION.
In fact, EDD's report on statewide staffing patterns (Occupations) within the "limited service eating places" shows that there are only 1700 employees classified in the "waiters and waitresses" occupation in the limited service restaurant industry statewide. http://www.labormarketinfo.edd.ca.gov/iomatrix/Staffing-Patterns3.asp?IOFlag=Ind&SIC=722590
If EDD's data is wrong, it therefore cannot be because of misclassification of limited service (QSR or Fast Causal) employees as "waiters and waitresses." With only 1700 potentially misclassified employees statewide, there simply can't be enough in San Diego to significantly affect the estimates.
In the spirit of getting to the bottom of the difference, we must be willing to at least entertain the possibility that the anecdotal evidence provided by restaurant owners is wrong. You say they can't all be lying, but we could clearly have a non-random selection of employers. The employers that raise this concern may all have wait staff that earn well above minimum, but we have hardly heard from a representative sample of restaurants. Obviously those whose employees earn few tips wouldn't be out complaining to reporters that their employees should get a raise because they earn so much. Troy Johnson's one call to a manager at a Denny's doesn't really have a very powerful sample size.
I would love to see someone pull together payroll data from ADP or Paychex or a similar large payroll processing company, to see what we could learn from that data about the total compensation of waiters and waitresses.
Again, I will note that the difficulty we are encountering with the data speaks to the difficulty the City might have in effectively enforcing a minimum wage ordinance with the kind of total compensation "tip credit" that restaurants are asking for. We could very easily run into the kinds of problems we see in tip-credit states were there are widespread tip credit violations that go largely undetected.
@Peter Brownell @Erik Bruvold Here is the thing - EDD also says there are MORE workers in full service than limited service eateries (same source)....and yet the market share piece linked prior says that QSR has 70% market share. Guess? That there are are a TON of fast food places (rubios? Chipotle? Robertos?) that are misclassified as full service places and then their employees get lumped into "Waiters and waitresses" and drive down the wages.
The second issue is whether it is a sampling issue. Surely some bias. But the data is so hard to get at and I think the misclassification so widespread (see prior paragraph) that EDD really needs to scrub this industry so we actually understand it.
In the end no one is disagreeing that there are a significant number of low wage workers in food services. What would be nice to know, however, is what the average wage is for employees that are receiving tips.
@Erik Bruvold @Peter Brownell You can check your widespread misclassification of restaurants hypothesis at EDD's website. Panera and Chipotle are correctly classified as limited service. There is one misclassified Rubio's in San Diego. Roberto's is consistently misclassified. But then Roberto's owner needs to have misclassified some of his employees as "waiters and waitresses." I'm still not convinced that you would see the numbers of misclassifications that would significantly drive down the EDD's wage numbers.
Also about the employment numbers, you are comparing occupations rather than industries. In "Limited Service" statewide there is one "First-Line Supervisors/Managers of Food Preparation and Serving Worker" for every 4.2 "Combined Food Preparation and Serving Workers, Including Fast Food." And then there are "counter attendants." Statewide the industry numbers are pretty similar. Also wouldn't you expect fast food to be more efficient? Their whole business model is more sales with less labor.
BTW, bartenders also don't make that much in tips, according to EDD. Do you think employers are misclassifying them, too?
I agree that it would be nice to have a second data source regarding the wages (including tips) of tipped occupations. Why not check the CPS data for California and see how they compare to EDD's California numbers?
@Peter Brownell @Erik Bruvold If you are using the EDD web pages that are derived from Infogroup it is my understanding that said source is NOT definitive/used in compiling QCEW or occupational outlook. It is also pretty error ridden - just go through and see things like the Deli at Albertsons being lumped into the limited service Category or all the "Bertos" of all stripes in the full. Fair number of fast casuals also misclassified. I stopped at the "Cs"
Also remember how EDD does this. They take the SOE survey (1.2 million establishments NATIONWIDE) that gives them data on staffing by occupation information. Then they take the Payroll data that feeds into the QCEW information and they extrapolate staffing by occupation from the SOE.
Regarding bartenders different measurement bias. Those tips are often (usually?) cash. I have no doubt that we have a measurement problem there because of it.
The problem with the CPS is that we get into the grey area (see Bartenders) of cash tips where I think we will have a ton of measurement errors. The attractive thing about waiters and waitresses is that with the rise of paying through debit/credit cards we can get a much better feel for real wages.
@Erik Bruvold @Peter Brownell Seems like an awful lot of minutia discussed in these exchanges. It would seem all you have to know is do you personally buy more pizzas, hamburgers and tacos when the price goes up due to increases in the minimum wage and if the current minimum wage locks in workers how is it the BLS reports 98.6% of all full time workers earn more than the minimum temporary "learning" wage. Obviously, those advocating an increase in the minimum wage are not responsible for the resulting losses in jobs and the hardships visited on those losing their jobs. A case of Bastiat's "Seen and Unseen."
@Fred Schnaubelt @Erik Bruvold @Peter Brownell Ted - I agree. I doubt a lot of people care that much. But I remain interested in the disconnect between what the owners and operators think is going on and what the data says. Intuitively makes no economic sense that waiters and waitresses would earn a median wage LOWER than fast food counter workers. So SOMETHING it going on in the data.
@Fred Schnaubelt @Erik Bruvold @Peter Brownell Fred, dumb response. The owners continually say that Waiters and waitresses make much more than $10 an hour. Much more. Clearly many (most?) have more skills than counter workers at fast food places. And yet the EDD data says they are paid LESS (mean of less than $10) and some are making policy based on that data. The important question is why/what is explaining these non-economic intuitive results (because if you believe in the free market and believe that owners/operators do as well then the data isn't in accord with that sort of behavior.)
The focus on the income of tipped servers is a distraction, I think conjured by opponents and fed by media response. There are many more people making minimum wage who receive no tips. More focus is needed on the big picture.
@Chris Brewster By the big picture do you mean focus on the 102 million Americans not working reported by Forbes based on U.S. Bureau of Labor data? And does this increase inequality of incomes between those working and those not working?. The Seen and unseen.
Forbes reports 102 million Americans not working. http://www.forbes.com/sites/peterferrara/2014/01/24/after-five-years-of-obamanomics-a-record-100-million-americans-not-working/
@Chris Brewster Yes indeed, the Bureau of Labor Statistics (BLS) reports in California less than one and half percent (1.4% ) of full time workers earn the minimum wage, or learning wage. Purportedly most people get a raise within one year as soon as the learn to show up on time, show up the day after getting paid, and learn the most basic skills of the job they are doing. A fraudulent education delivered by government schools seems to explain a lot about those stuck at the minimum wage for more than a year. About 15% of adults in San Diego do not have a high school diploma and about 20% self-report to the Census they don't speak English. Is this part of the big picture?
Mr. Schnaubelt: You nailed it. The big picture is people with little or no education and variable language skills willing to do an honest day's work for an honest day's dollar and in doing so earning enough to feed and clothe themselves and their families. In my view, there is no obligation to have a college education to offer unskilled labor in exchange for wages. But there is an obligation for us, as a society, to require that people offering same receive wages adequate to cover the cost of food and shelter.
One thing is certain, dead certain as the saying goes, you never see world renowned Black economists quoted in these discussions. So here goes:
"unemployment rate among black teenagers back then (when I was a teenager) was a fraction of what it would become later, after "compassionate" politicians repeatedly raised the minimum-wage rate to keep up with inflation.
In 1948, the year I left home, the unemployment rate among black 16-year-olds and 17-year-olds was 9.4 percent.
Over the decades since we grown accustomed to unemployment rates among black teenagers being more than 30 percent and as high as 50 percent. Such is the price of political "compassion."
@Fred Schnaubelt World-renowned, I don't know about that, but Thomas Sowell is a black conservative who for decades has written about and argued against the minimum wage, affirmative action, busing, and welfare. He has defended The Bell Curve and minimized the impact of the 1964 Civil Rights Act.
I reject the all-government-action-is-bad, free-market-rules-all philosophy promoted by this writer, especially as it relates to the minimum wage discussion in San Diego. His extreme views argue against any minimum wage at all (any government intervention, really). I think such views ignore reality and would increase income inequality at the expense of our less-politically-connected citizens.
@hockeysuit @Fred Schnaubelt Hockeysuit. It is perfectly understandable why you would not want to accept the facts and public record as well as government statistics that Sowell documents in at least the 30 books of his that I have read and own. No doubt you do not accept Walter Williams' studies nor Shelby Steel's either. After all what would Black professors know about living the Black condition? I'm not sure but I think Sowell and Willams do not consider themselves conservatives, but Classical Liberals much like Nobel Laureates F.A. Hayek and Milton Friedman.
As you undoubtedly know Democrats did everything in their power to prevent adoption of the Civil Rights Act of 1964, and Sowell and Williams document that Blacks made more economic progress in the 5 years prior to passage than in the 5 years after and the Bell Curve is grossly misrepresented by people who never read it..
Undoubtedly, these gentlemen's failing is in seeing things as they are and not
what people wish them to be, but alas, that is the study of economics.
Economists of every stripe don't think much of "good intentions.".
@Fred Schnaubelt @hockeysuit @eric bruvold -- I responded to your earlier post to give a bit of context to Mr. Sowell as a source on the issue of the minimum wage. You confirmed his far-right libertarian leanings and placed yourself in that end of the political spectrum as well. No big surprise.
If I understand the libertarian position correctly, there should be no minimum wage; setting minimums represents an unnecessary government intrusion in the marketplace. I fundamentally disagree, as I suspect do most San Diegans. I guess time will tell.
Speaking of facts regarding the minimum wage, I thank Eric Bruvold for providing some insight into the difficulty of obtaining good data on tipped restaurant staff - and even that subgroup, I would guess, represents a minority of all minimum-wage workers.
Nothing there supports the idea that having a minimum wage requirement is responsible for any social ills.
Reminds me of Mark Twain’s line “Lies, dammed lies, and statistics”.
Can think of several reasons why “statistics” may be in error:
Teenager employment skills in 2014 are not the same required in 1948 (for example) –
No more gas pump attendants – now automated
No more car washes – now automated drive through
No more simple construction tasks digging etc. – now a bobcat or backhoe quicker and more efficient.
Other factors in society change too:
No more lawn mowing – Adult professional landscaping (same cost).
Best bet is for teens is to learn (self-taught if necessary) a skill to make their services more valuable.
Comment on “…$1.07/hr. …” tip. Is anyone “surprised” that all tips are not reported as income (IRS)?
To Hockeysuit. People and newspapers are correct to be suspicious of people afraid to use their real names. Usually when such people do not have the facts on their side they accuse people who differ as "Right Wing" as though that is a persuasive argument. The majority of economists regardless if so-call right or left (unless paid by unions) look at the last 60 years of minimum wage increases and conclude raises have resulted in fewer people, particularly teenagers, being employed. Government statistics and facts are stubborn things. Most people understand when prices go up they buy less -- less steaks, hamburgers, pizzas, less more expensive clothing, fewer jeans and shirts less or smaller apartments or houses. You may be the exception, but if you own a business I doubt you hire more people when wages go up or the higher they go the more people you hire. This is common sense not lying with government statistics. And Chris Wood you make some valid points --- now ask yourself why did those job disappear? What motivated employers to eliminate those jobs. In society "wants" are unlimited as economists are fond of saying --- therefore jobs are unlimited --- except when government intervenes to make millions of honest jobs uneconomic or illegal to fill. In 1794 James Madison called this "the old trick of turning every contingency into a resource for accumulating force in government. It may make people who advocate a higher minimum wage feel good about themselves, but it does not help people in their first job, with minimum skills, education and work experience --- put food on the table. You might look up Bastiat's "Seen and Unseen" if you truly care about other people. Unseen are th 23.4 million young people nationally unable to find a job. http://mjperry.blogspot.com/2010/06/teenagers-silent-victims-of-minimum.html
@David Cohen Nothing supports the idea that 102 million American are without jobs as reported in Forbes. It's all imaginary.
@Fred Schnaubelt @hockeysuit Fred, are you only suspicious of anonymous commenters who disagree with you? I'll let you in on a secret: VOSD knows my real name, and you can too! If you're interested, just click --well, I'll let you figure it out.
I get it that the libertarian viewpoint disdains government intrusion into the "free market", and that they/you believe the minimum wage causes unemployment, unintentionally or otherwise. I assume that you believe that there should be no minimum wage at all -- if I'm wrong please let us know what you think a fair minimum should be.
One other observation: you seem to uncritically believe in "government statistics", assuming I suppose that they are unfailingly accurate, used only in proper context and not cherry-picked to make a point.
I support the concept of the minimum wage and current efforts to raise it. Raising the base wage increases our poorer citizens' purchasing power, with resulting increases in spending, production, and hiring, and decreased demand for government assistance programs.
Finally, I find Paul Krugman's support for raising the minimum wage quite credible and convincing.
@hockeysuit @Fred Schnaubelt The clarification is that you and like minded people are urging no minimum wage regardless of what you profess. People disemployed have no wages. Simply another case of good intentions gone awry. Aren't you glad you have no responsibility for the result of the policies you advocate and pay no price for being wrong?
I teach energy management and I know how to help offset minimum wage raises over time in small business. The "low hanging fruit" of energy efficiency can reduce small business operating costs ( start with light bulbs change out and go from there. See Energy Star), and increase productivity from better health, for starters. Add solar panels and almost zero out your energy bill, freeing up cash flow. Leasing your space? Support the CCA being proposed and you will be able to choose a cheaper, (like Marin) and greener energy mix on your energy bill.
This can be analyzed in greater or lesser detail, but I suspect it will be decided by voters who have little interest in the details. My wife and I support the increased minimum wage ordinance no matter how much one waitperson or another gets in tips.
Who knows if the tip figure is correct or not. Perhaps all the fast food guys make next to zero in tips and the restaurant employees make an average of $5 an hour - hence the low average per hour. In any case, the question at the heart of it all is should there even be a minimum wage, or should we let (as some think, but do not say) let the free market determine wages. If you believe in the latter, many employers may be able to get by paying $5 hour. Would that be Ok? But, if you believe there should be a minimum wage, what level should that be? At the state minimum wage of $10 per hour, a single person would earn $20,000 per yr. gross, before taxes and excluding tips. A couple would earn double that. If they had 2 kids, they would be supporting a family of 4 on $40,000, before taxes. in San Diego,.That is crazy!
Useful article, thank you. Still I think we all need to revisit Nickel and Dimed: On (Not) Getting By in America, a book written by Barbara Ehrenreich. I don't think all that much has changed in the last decade. To Allen H. in the nice jacket in the photo, you and your friends may tip 20% at CoCos (I do too). But what about people who dine at Carl's Jr.? What's wrong with linking wages to the cost of living? Should minimum wage workers ever get a raise? If so, when? How? Which brings me to another subject: I'd rather have collective bargaining than individual begging. I'm speaking from experience here.
Gosh, the waitress I have at CoCos has been there for at least 10 years, and the one at my favorite steak and Chop house has been there from the day it opened six years ago. Everyone I know tips at least 20%, and I don't know how they split that with the kitchen but I do know they never leave their jobs!
@Allen Hemphill That's great that you and your friends tip 20 percent minimum, but trust me, there are many, many people who do not.
There's still a lot of confusion regarding what constitutes a good/acceptable tip for good service. Some people think 10 or 15 percent is adequate and that you are being too generous. Others do not know how to look at the bill and calculate the tip quickly, as they were taught to just double the tax. It's also a regional/cultural issue according to this study: