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Missouri Legislature Debates Wage Cuts For Servers

In 2006, voters in the state of Missouri overwhelmingly passed Proposition B, an initiative that mandated a minimum wage increase for hourly workers.  Prop B passed with a 75% majority, and after some debate, Missouri decided that workers who receive an hourly wage plus tips were eligible for the pay increase.

Times have changed since 2006, to say the least.  The economic downturn has hit Missouri’s restaurant industry hard, and now the state’s restaurant association is backing a Republican bill to cap hourly wages for tip earners at $3.52, half the hourly minimum wage of $7.05.  A compromise amendment would cap the minimum wage after a planned increase this summer.

Neither servers nor restaurant owners are happy with the bill.  Servers say the cap is tantamount to a wage cut, something they can ill afford in a down economy.  And restaurant owners say their payroll expenses have skyrocketed since 2006, something they can ill afford in a down economy.

Interestingly, the catch in this whole debate is who would actually be affected by the passage of the bill. 

The average server earns $10 – $15 an hour in tips, which means most if not all of their hourly wage goes to taxes, regardless of whether their wage is capped or is raised slightly.  And this bill would not change a Prop B clause that requires restaurant owners to pay their servers the $7.05 minimum wage if they don’t make at least that in a given week.

So servers who claim they’re taking a pay cut aren’t really getting hit that hard since the vast majority of what they make is in tips.  And they’re guaranteed a minimum wage if tips aren’t sufficient.

At the same time, restaurant owners who claim they can’t afford the current wage are not going to get the wage cut they were looking for.  At best, wages will be capped at their current levels, which does nothing to help restaurateurs who blame the current wages and the recession for their problems.

That means Missouri restaurant owners are going to have to look elsewhere to cut costs and increase revenues.  And in the end, looking to cut costs in staff first is probably not the best option on the table.  After all, wait and kitchen staff are what make every restaurant tick, and in the long run, well paid staff means better sales and reduced turnover, both of which translate into more profits.

Perhaps it’s time for restaurateurs in Missouri to look at other operational costs and see how they can streamline their business before they start putting a lot of energy, money, and time towards targeting their payroll.

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2 Responses to Missouri Legislature Debates Wage Cuts For Servers

  1. LarryE April 15, 2009 at 1:34 am #

    The writer sounds like he wrote the business plan for General Moters and Chrysler. Keep paying higher wages for the same product means “better sales and reduced turnover, both of which translate into more profits”. Sounds good in theory, but the consumer has a different view. There is a point when the cost of the product outweighs the value of the product to the consumer.

    • Greg McGuire April 15, 2009 at 8:33 am #

      Well, I would say Detroit is an extreme example of what I’m talking about. A little more moderate, and what a lot of restaurant managers say, including in Missouri, is that there are a lot of ways to reduce costs in your restaurant, and reducing payroll is one of them.

      The problem is, many companies freak out when profits fall and start hacking away at payroll when they should be employing multiple strategies to reduce costs. Cutting payroll is one of those options, but it’s kind of like pruning a tree. If you chop off a main branch rather than trimming many smaller twigs, the tree will take years to recover.

      I don’t think there’s a restaurateur out there who thinks his or her employees perform better after getting their pay cut. And when you are a sales driven business, like restaurants, your employees are all you’ve got to grow revenue and maintain service and quality.

      All I’m saying is explore all of your options. And if you can pay a living wage while keeping profitability, then by all means do so.

      For more, check out this post: Should You Cut Costs In Payroll?

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