Philanthropy vs. Tipping: The Funders Behind a Nice Win for Restaurant Workers

The restaurant industry is the one of the largest private sectors in America, raking in over $709 billion last year alone. It’s also one of the fastest-growing private sector employers in the country, with 14 million people currently employed in restaurants and another 2 million new restaurant jobs expected by 2025. Restaurant workers have long been among the economy's most exploited and underpaid workers, but as nonprofits and foundations turn their focus to income inequality and labor laws, that tide is beginning to turn.

The Ford Foundation has had its eye on economic fairness for restaurant workers for some time, now. As we reported to you last month, since 2009, Ford has been one of the leaders in the philanthropic charge to improve wages for restaurant workers through its backing of Restaurant Opportunities Center United. Other funders who've recently supported this group include Annie E. Casey, the Open Society Foundations, California Wellness, Kellogg, the Rockefeller Foundation, and the New York Foundation.

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Among its other battles, ROC has challenged the outrageously low federal minimum tipped wage of just $2.13. Over the last 20 years, inflation has eroded the value of the tipped wage, resulting in the lowest real value since it was created in 1966—leaving far too many workers to live on virtually nothing and forced to make it up in tips.

Who are those workers? Well, as ROC's co-director Saru Jayaraman recently wrote in the New York Times, most are women and many are people of color. Tipping, she says, has an "ugly, racialized history." She goes on:

Worse still, this two-tiered system is the reason the restaurant industry is the single largest source of sexual harassment claims in the United States. Women forced to live on tips are compelled to tolerate inappropriate and degrading behavior from customers, co-workers and managers in order to make a living.

All of this explains why ROC has pushed for laws around the country "that will require the restaurant industry to pay all its employees at least the regular minimum wage." The group has been pushing big restaurant employers, too, and just scored a nice win in New York City. 

Union Square Hospitality Group, the force behind some of the city's most revered restaurants, run by Danny Meyer, recently announced it would completely eliminate the archaic practices of tipping at every one of its thirteen venues in favor of a single fair wage. And while many individual restaurants have already eliminated tipping from their businesses, this is the first time a major American restaurant group has dispensed with the practice.

This is particularly important for closing the wage gap between servers and cooks. NY Eater reports:

Waiters at full-service New York restaurants can expect a full 20 percent tip on most checks, for a yearly income of $40,000 or more on average—some of the city’s top servers easily clear $100,000 annually. But the problem isn’t what waiters make, it’s what cooks make. A mid-level line cook, even in a high-end kitchen, doesn’t have generous patrons padding her paycheck, and as such is, on average, unlikely to make much more than $35,000 a year.

The fact that the people making your food earn drastically less than those carrying it to your table is pretty disgraceful. And in cities like New York, L.A. and San Francisco that have heavy restaurant dining cultures and where the cost of living is especially high, the realty is unconscionable.

If you’re wondering how the elimination of tipping will raise wages, the answer is two-fold: the first part lies with you, fine diner. Restaurants that forego tipping will make up for it by increasing the prices on their menus and tacking on service fees, comparable to what is currently considered a high-range tip. Essentially, you’re still tipping, it’s just no longer optional. The second part, however, is that by eliminating tipping and calling it a service fee, restaurants can get around an asinine federal law that bars dishwashers, cooks, chefs, and janitors from taking part in restaurant tipping pools—a common system in which all the servers’ tips are pooled together and split evenly.

Danny Meyer's decision to eliminate tipping was big win for ROC, but also for its top backer, Ford, which has been having a nice run lately, as we've reported.

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While Ford's chief, Darren Walker, recently made a big splash by saying that the foundation would focus on combating inequality, the foundation is already one of the bigger funders of efforts to boost the wages and rights of U.S. workers. For example, it's given over $15 million in recent years to the National Employment Law Project, which has played a key role in a number of labor battles, including the successful push to expand overtime pay.

Related - Behind a New Worker Overtime Rule: Hard-Hitting Policy Wonks and Generous Funders

Ford has also supported the Economic Policy Institute, Demos, and other policy shops working this front. And it has invested big in Family Values @ Work, the lead national organization battling for paid leave for U.S. workers.  

Given all that Ford's been doing on inequality, we're pretty curious to see what it will mean for the foundation to really get serious about this issue. 

RelatedWhy This Advocate Gets Big Bucks from Ford to Push Family Leave Policies