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Independent estimate suggests it means almost $6 billion in lost wages

Tim Nelson
February 02, 2018

Many on the service side of the restaurant business already had a sneaking suspicion that the Trump administration’s plan to reverse a ban on tip pooling would take money out of their pockets. Now, evidence suggests that the Department of Labor actively hid economic data showing just how devastating its impact could be for the wallets of wait staff across the country. 

In December, the Department of Labor announced its intention to overturn an Obama-era regulation which declared tips to be the property of the workers who collect them rather than their employers. While some in the restaurant business saw this reversal as a way to provide tips to the back-of-house cooks and dishwashers who don’t have a chance to earn them, it was written in a way that would allow employers who paid their staff at least a minimum wage base salary (rather than claiming a tip waiver that lets them pay as little as $2.13/hour) from pocketing 100% of gratuities. 

The initial assessment of the policy’s impact seemed to skirt around the issue of lost wages, and thanks to reporting from Bloomberg, we now know why. In its quest to overturn Obama’s policies at all costs, the Department of Labor scuttled an internal policy assessment which showed that restaurant staff stood to lose billions of dollars in potential gratuity-based earnings. Senior officials demanded that staff revise the study’s methodology to minimize its economic impact, and Labor Secretary Alexander Acosta’s team ultimately sought and received approval from the White House to scrap the analysis from the initially published proposal entirely. 

According to at least one former member of the Office of Management and Budget’s Office of Information and Regulatory Affairs team, such an obfuscation represents a worrying break from precedent. “Historically OIRA’s position has been that analysis is a good thing,” Stuart Shapiro, an OIRA analyst who worked in the Clinton and Bush White Houses, told Bloomberg Law. “It helps us make better decisions, it helps us increase the transparency of the regulatory effort. 

While we may not know the exact figures that scared off the DOL before the policy’s public comment period conveniently closes on February 5, an independent analysis by left-of-center think tank Economic Policy Institute suggests that employers could pocket up to $5.8 billion in tips each year. The fact that they were able to crunch the numbers also seems to undermine the DOL’s public-facing argument that it was just too difficult to figure out the data.

And while some (including the DOL) posit that the fear of losing disgruntled employees would prevent restaurateurs from hoarding tips, the public doesn’t have access to data on how (or if) that might change things. Just know that next time you want to pat yourself on the back for leaving a generous tip, it might not be helping out who you think.  

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