McDonald’s has exited the National Restaurant Association over a disagreement on tipping policies. The fast-food giant wants an end to the tipped wage model.
Tipped wage credit
The federal minimum wage sits at $7.25 per hour, whereas the federal tipped minimum wage is only $2.13 per hour.
That allows restaurants and bars to pay their employees who are tipped the lower minimum wage, while having customers fill in the gap.
Download the SAN app today to stay up-to-date with Unbiased. Straight Facts™.
Point phone camera here
“The tip credit is simply the ability of employers to pass their wage bill on to customers via tips,” Sylvia Allegretto, senior economist at the Center for Economic and Policy Research, told Straight Arrow News.
Fast-food restaurants like McDonald’s don’t have tipped workers and therefore can’t use the tip credit.
“Part of what I think we need to do in this minimum wage conversation is, let’s start with everybody should be paying the same minimum wage, whether that’s tipped or non-tipped,” Chris Kempczinski, McDonald’s CEO, told CNBC. “We already know there’s about eight states that have no difference between tipped and non-tipped, and we know that in those states, poverty levels decrease. We know that turnover levels go down. We know that actually it doesn’t lead to any job loss.”
It’s something McDonald’s has been vocal about for years.
“If it’s a hamburger place and they’re using full-service restaurant tipped workers, then they’re saving a whole lot of money in their wages, right, that McDonald’s can’t save,” Allegretto said. “So, it’s a competitive advantage that McDonald’s is speaking out about.”
McDonald’s leaves the National Restaurant Association
The National Restaurant Association is the largest food service trade association in the world, and a lobbying powerhouse. They’ve played a prominent role in opposing minimum wage increases, sick leave and similar issues.
They continue to support having a tipped minimum wage, which is where they’re at odds with McDonald’s.
“There’s already been a model that shows that tipped wages can be at the same as the federal minimum wage,” Kempczinski said. “We just need to do that, I think, across all 50 states. And we’ve said repeatedly, we’re open to conversations on raising the federal minimum wage.”
Allegreto said market forces likely pushed McDonald’s to finally break from the association over the years-long issue.
“Perhaps because of other economic forces, especially getting over COVID, and since COVID and increases in the supply chain of food and increases in beef prices and that type of thing,” Allegretto said. “They’ve had to increase their prices, and perhaps that divide has grown even larger over time.”
McDonald’s recently suffered their worst sales decline since 2020.
The association didn’t respond to a request for comment.
No tax on tips
No tax on tips was a campaign promise from President Donald Trump, and a section in his recent budget bill made that a reality for workers in certain sectors who make less than $160,000. The change is also temporary and applies until 2028. Tipped employees must still pay state and local taxes on tips.
“Anything that is done to help restaurant workers, I’m in favor of,” Kempczinski said. “So I support no tax on tips. The issue with no tax on tips is it only benefit(s) those restaurants that have tips. And so, as you’re rightly pointing out, we don’t do tipping at McDonald’s, and so we don’t get the benefit of, essentially, that tax relief there.”
The National Restaurant Association showed its support of this policy earlier this year.
As far as the tipped minimum wage, it doesn’t appear to be coming to an end at the federal level anytime soon.
“These workers are typically not unionized, tips workers, low-wage workers,” Allegretto said. “McDonald’s workers aren’t unionized, so they don’t really have much of a voice in Washington, D.C. It’s the only thing that explains this situation that is absolutely absurd at this point.”
