The New Jersey Business and Industry Association (NJBIA) expressed opposition to a proposed legislation aimed at increasing the minimum wage for tipped workers by removing the tip credit in New Jersey. The bill, known as A-5433, was under discussion by the Assembly State and Local Government Committee.
Elissa Frank, NJBIA Vice President of Government Affairs, voiced concerns about the potential economic impacts, saying, "There is significant economic research showing how tip credit elimination results in substantial losses for both restaurant employers and their employees." Frank also highlighted that data indicates a decrease in tips when tip credits are removed, negatively affecting tipping percentages in states with no tip credit.
Recent discussions with NJBIA members have suggested that the bill could lead to increased costs for businesses, possibly resulting in job cuts, heightened payroll taxes, and even restaurant closures. "From a strictly business standpoint, another bill to burden employers with already slim margins is exactly what we don’t need in New Jersey right now,” Frank stated.
The bill proposes modifying New Jersey's minimum wage law, gradually eliminating the tip credit over five years. This change would obligate employers to pay the full minimum wage, regardless of employees' tips. Denise Beckson, Vice President of Human Resources at Morey’s Piers and NJBIA Board of Trustees member, remarked, "Ending tipped wages is a recipe for disaster. It will hurt restaurant workers, owners and the general public. This is a no-win proposal that will negatively impact those it seeks to help."
A report by the Employment Policies Institute in 2022 suggested that eliminating the tip credit could lead to significant job losses and reduced earnings in the restaurant industry. The report estimated that every $1 increase in the federal tipped minimum wage could result in a 6.1% decrease in restaurant employment and a 5.6% drop in earnings for tipped workers. Additionally, a $15 minimum wage with no tip credit could cut over 801,224 jobs, with 466,040 of them belonging to tipped restaurant employees, leading to a total loss of nearly $2.2 billion in annual earnings for full-service restaurant workers across the U.S.
Frank concluded that the bill ostensibly seeks to support tipped workers, but, "most will make less and/or have fewer jobs to choose from...this bill seems like a lose-lose-lose."
