GRAND RAPIDS, Mich. — Currently, many servers and bartenders in Michigan make less than $5 an hour, with their tips making up the difference.
The state plans to do away with that model, gradually increasing wages through the next few years, until they hit $12 an hour.
The change concerns some restaurant owners because the first price increase is coming up— wages are set to go to $10 an hour on February 21, 2025.
READ MORE: 'Our system is not broken': Hundreds gather to protest elimination of Michigan's 'tip credit'
It's a busy Sunday afternoon at Real Food Cafe in Alger Heights in Grand Rapids.
“This particular restaurant uses about 15,000 server hours a year,” Restaurant Partners Management Chief Operating Officer Pat Hilton said.
Those 15,000 hours are going to cost more in the coming months, to the dismay of Pat Hilson, Chief Operating officer for Restaurant Partners Management.
“Michigan restaurants are facing an impending disaster with the elimination of the tip credit,” Hilton said.
Hilton says these servers make on average $25 to $30 an hour, including their tips.
An increase in the hourly cost of labor would put Real Food Cafe in the red, Hilton said.
“This elimination of the tip credit would result in an additional $180,000, in a restaurant that makes $80,000," Hilton said.
READ MORE: 'I would eat the cost': Restaurant owner prepares for tip wage increase
He says the money has to come from somewhere.
“If the tip credit goes away, we will have to raise menu prices,” Hilton said.
The estimate for a price increase is around 20-30% more, Hilton said. He also feels the stress will close one in 5 restaurants, impacting forty to 60 thousand jobs lost.
READ MORE: Michigan servers, lawmakers object to end of tipped wages
He's asking the public to contact local lawmakers to oppose the change.
“We ask that the public who come and enjoy services from these great servers and bartenders across Michigan, that they call their representatives,” Hilton said.
One Fair Wage, the group behind the movement to increase pay for servers, says the idea that restaurants will suffer isn't something they've seen in the more than half dozen states that have already increased wages.
They say largely, the restaurant industry has done better with servers and bartenders making more money. They say there's a misconception that's been created by restaurant associations.
“They don’t want to pay more. So they scare small business owners, medium business owners, workers. They’ve only lived and operated under one type of regime, so they don’t know what change looks like,” co-founder of One Fair Wage Saru Jayaraman said.
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