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Congressional Democrats air plan to kill the tip credit, raise the minimum wage to $15

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Restaurants would not be allowed to count servers’ tips toward the minimum wage after 2026 if a bill introduced into the U.S. Senate and House of Representatives should be passed and signed into law.

The same measure would raise the federal minimum wage to $15 an hour by 2024 in six stages beginning this year. After 2024, the minimum legal pay would rise or fall in accordance with the general trend in wages.

The bill has widespread support among Democratic lawmakers and their independent allies, with 161 co-sponsors led by Sen. Bernie Sanders. Included in that group are Speaker of the House Nancy Pelosi and Senate Minority Leader Chuck Schumer.

Yet few believe the bill has a chance of passing. Even if it should pass the House, where Democrats have a majority, it is still likely to be defeated in the Republican-controlled Senate. If the measure was approved by Congress, it would still need the signature of the president, and Donald Trump has stated that he does not believe wages should be set at a federal level.  By all accounts, a veto would be far more likely.

The measure is widely seen as an attempt by Democrats to tag Republicans as unsympathetic to the working class.  That perception could then be used as a campaign point in the 2020 race for the presidency. 

Sanders discounted the skepticism about the bill’s chances. “Just a few short years ago, we were told that raising the minimum wage to $15 an hour was ‘radical,’” he said in a statement. “But a grassroots movement of millions of workers throughout this country refused to take ‘no’ for an answer.”  A $15 hourly wage has been a cause aggressively pursued by unions and coalitions such as the Fight for $15.

A number of municipalities and three states—California, Massachusetts and New York—have passed legislation that will eventually raise their hourly minimum wages to at least $15. 

The federal minimum wage, which hasn’t been increased since 2009, is currently $7.25. With the tip credit, employers can pay servers in states that allow it as little as $2.13, provided the employees collect at least $5.12 per hours in tips.

The bill introduced on Wednesday, known as the Raise the Wage Act, would raise the minimum wage that restaurants are required to directly pay their servers and bartenders to $3.60 per hour this year. It would climb by $1.50 per year or jump to the wage due nontipped employees in the years afterward, depending on which increase would be lower. 

Under the law, the two minimum wages would be equalized no later than 2027. At that point, the tip credit would be outlawed nationally. It is currently not allowed in California, six other states and the District of Columbia. A server wage exceeding the federal level of $2.13 is required in 27 other states, leaving 16 states where employers can pay a minimum of $2.13 to tipped employees.

The wage bill would raise the hourly minimum wage for nontipped employees by $1.30 a year for five years and by $1.25 in Year Six. Afterward, the increase or decrease would be indexed to the percentage of change in the median level of hourly pay, as determined by the U.S. Department of Labor. 

The Raise the Wage Act drew a negative reaction from the National Restaurant Association. It responded that the minimum wage should be a state-level matter because the cost of living varies widely from coast to coast.

“$15 in New York is not equivalent to $15 in Alabama. The economic environment is different in each state, and restaurants require flexibility to overcome those unique challenges and realities,” Shannon Meade, VP of  public policy and workforce for the group, said in a statement. “Should Congress drastically increase operating costs then these small businesses will be forced to hire fewer people, reduce hours, or even close their doors.”

Meade called for “a common sense and balanced approach” to raising the pay floor.

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