How do we fix this? We need to float the tip credit.

One of the biggest hurdles facing Denver’s restaurant sector is our city’s fixed tip credit.

What’s a tip credit?

The tip credit is the percentage of the minimum wage the restaurant owner can claim off of the minimum wage when a tipped employee earns enough in tips to surpass the minimum wage.  In Texas, the tipped minimum wage is 22% of their $7.25/hr in minimum wage. In New York City, the tipped minimum wage is 66% of their $17/hr minimum wage. In Denver, our tipped minimum wage is 84% of our $19.29 minimum wage. 

And that is why of all of the costs that have increased for restaurants, labor has increased the highest - by 50%.

When Denver raised its minimum wage to among the highest in the nation, it was barred from changing its tip credit from $3.02. That’s why while Denver’s minimum wage went up by 65% over the last five years, Denver’s tipped minimum wage went up by 100%. 

How do we fix this? We float the tip credit.

Last year, Colorado gave Denver new authority to adjust its tip credit. Had Denver floated its tip credit in 2019, Denver’s tipped minimum wage would be 73% of our $19.29 Minimum Wage. 

And because no tipped employee can take home less than the minimum wage and tips have to exceed that minimum wage, average total take home pay for tipped still remains north of $25/hr even on slow shifts. 

Cities across the country are discussing how to fix this issue. In Chicago, city leaders just announced a deal to land their tipped minimum wage at 76% of their 16.60/hr minimum wage. Washington DC is talking about a similar target. Here in Colorado, Edgewater made the decision to start floating their tip credit. Boulder is expected to take the issue up as well. Its time for Denver to take this conversation seriously.