Republican lawmakers agreed to send several measures to the November ballot this week, including a proposal to allow restaurants to pay their tipped workers 25% less than the minimum wage, instead of the current $3 “tip allowance.”
This change would save restaurants an additional 57 cents per hour.
The Arizona Restaurant Association proposed this measure to counter an initiative aiming to raise the minimum wage beyond what Arizona voters have approved twice.
The current law increases the minimum wage annually to match inflation, currently at $14.35 an hour. However, it allows restaurants to pay tipped workers $3 less, as long as their total earnings meet the minimum wage.
A group called “One Fair Wage” is collecting signatures to phase out this tip credit by 2027 and raise the overall minimum wage by an additional $2 an hour over the next two years, on top of inflation adjustments. This could increase the minimum wage to $18.
If these changes happen, restaurants would have to pay the full $18 per hour regardless of tips, compared to $11.35 under the current law. This worries Steve Chucri, president and CEO of the Arizona Restaurant Association.
Chucri’s organization convinced lawmakers to propose paying tipped workers 25% less than the minimum wage, which would be $13.50 an hour if the minimum wage reaches $18.
To gain public and some worker support, the proposal includes a guarantee that workers would take home at least $2 more than the minimum wage, meaning $20 if the minimum wage becomes $18.
On paper, this would increase wages, but Chucri believes most wait staff would earn the $20 minimum with tips, saving restaurants money by only being responsible for $13.50 of that.
Senator J.D. Mesnard, a Republican from Chandler, supports the measure, arguing it benefits workers and helps restaurants with tight profit margins, which have struggled since the last minimum wage increase in 2016. He believes without these changes, restaurants won’t be able to maintain their workforce.
However, Senator Anna Hernandez, a Democrat from Phoenix, disagrees, saying it’s incorrect to blame business closures solely on minimum wage increases. She points out that inflation and other expenses also play a role.