NJ Capitol by Lowlova on Wikimedia Commons is licensed under CC BY-SA 4.0.
In a time where President Trump’s no tax on tip policy is more popular than ever, New Jersey lawmakers are considering a bill that would threaten jobs in tipped industries.
New Jersey Assembly Bill A5433 would eliminate the state’s tipped minimum wage, instead requiring employers to pay all tipped workers the standard minimum wage, regardless of the tips they receive. This shortsighted policy would hurt the very workers it claims to help while also damaging the state’s crucial restaurant industry.
The tip credit system in New Jersey has worked for decades by allowing employers to pay a lower base wage to tipped employees, as long as their tips bring them up to at least the state minimum wage. In any case where an employee’s earnings after tips are below the minimum wage, employers are already required to make up the difference. This system benefits everyone as it helps restaurants manage labor costs, keeps menu prices competitive, and allows workers to earn more through their own hard work and dedication. According to a poll highlighted by the Employment Policies Institute (EPI), tipped workers overwhelmingly prefer the current system, with 97 percent saying they would rather keep the tipped wage system than move to a flat wage.
Eliminating the tip credit, as A5433 proposes, would raise costs for restaurants already struggling to stay afloat, especially as people are reeling from inflation and the pandemic era which saw massive business disruption in the New Jersey area. According to the New Jersey Business & Industry Association, this bill would “hurt restaurant workers, owners and the general public. This is a no-win proposal that will negatively impact those it seeks to help.” Many tipped workers worry that customers will stop tipping once they know servers are earning a higher wage, leading to lower overall earnings for tipped employees. Evidence from other states that have already eliminated their tip credit shows this concern is valid: earnings drop, hours get cut, and some restaurant jobs disappear altogether.
The consequences for New Jersey’s restaurant industry would be severe. EPI estimates that eliminating the tip credit nationwide could cost more than 800,000 restaurant jobs and reduce earnings for full-service restaurant employees by over $2 billion annually. This would be particularly harmful in a state like New Jersey, where the hospitality and restaurant industry is a major source of employment.
At a time when the focus should be on economic growth and job creation, some legislators are instead pushing a policy that punishes success and threatens livelihoods. Lawmakers should protect tipper workers by opposing Assembly Bill A5433.
