The Wait-staff Minimum Wage Fallacy

Posted on 21. Sep, 2015 by in Opinion

Whenever the topic of re-evaluating the minimum wage is mentioned the issue, so to is criticism of the minimum wage for wait-staff brought up.

An ideal situation would obviously be where there is only one minimum wage for every person regardless of what job they work (ignoring that a reverse income tax is a superior alternative to a minimum wage). What needs to be considered here though is whether the minimum wage for Liquor Servers is actually too low.

A main consideration for this issue is the concept of tipping service staff. While this practice is not universal around the world it exists extensively across Canada and the US and is unlikely to change soon. The following is a look at where Liquor Servers in North America (specifically for this analysis, Ontario) get their income from.

Many jurisdictions apply a lower minimum wage to wait staff in general. In Ontario this lower minimum wage only applies to those serving liqour directly to customers at a licensed establishment. As of October 1st 2015 the minimum wage for Liquor Servers in Ontario will be $9.80 (up $0.25 from $9.55). In comparison this is $1.45 less than the $11.25 standard minimum wage as of October 1st 2015 (up $0.25 from $11). The issue to consider here is whether the discrepancy of $1.45, regardless of whether there should be a difference or not, has any impact in a practical sense.

To evaluate this claim we will look at a plausible work environment test case to see what a server might reasonably make.

General guidelines indicate (because there is not data on the subject) that one server is required for ever 8-12 guests or between 4-7 tables. It is customary in Canada to tip 15% the total of your bill.

We will use extremely conservative estimates to calculate a possible wage for Liquor Servers in this example case. We will assume 8 guests (or 4 tables of 2) with each ordering just a $20 meal. We are also going to assume a time-frame of an hour for the meal with the assumption that longer dinners would scale up proportionally in price with more food and drinks being ordered. This brings us to a total of $160 in food served over the course of the hour. At this amount a 15% tip would yield the server $24 in potential tips. One final thing to include is many restaurants require 1-2% of total tips be paid back into a pool for the kitchen staff, hosts, and busboys. That would mean we subtract 2% of $160 ($3.2) which leaves the server with $21.8 ($24-3.2) in remaining tips.

With a very conservative estimate of $21.80 in tips the server will end up with a wage of $31.6/hour. This would be considered a phenomenal hourly salary for most people both at an entry level all the way up to many seasoned professionals in a wide range of fields.

So while businesses relying on customers to directly subsidize their employees pay is not something we should be happy settling with, Liquor Servers are by no means earning less than, or even close to, the standard minimum wage.

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