Increased minimum wage creates tough choices for Oakland restaurant owners

On a recent Saturday morning, hungry customers lined up outside Aunt Mary’s Café in Temescal, waiting for tables to open up at the popular brunch spot. Inside, waitresses and hosts bustled around the restaurant’s tables, squeezing past each other to ring up customers and deliver trays of food. Taped to the cash register was a sign advising customers: “About our new 15% surcharge.”

The surcharge, which is automatically added to every bill as a partial substitute for tips, is one way that independent restaurants along Telegraph Avenue are coping with Oakland’s minimum wage increase. Last November, 81.8 percent of voters approved Oakland’s Measure FF, which on March 2 raised the minimum wage from $9 per hour to $12.25. In the six months since the wage increase, restaurants in Temescal and Uptown have experimented with creating surcharges, increasing prices and banning tips to manage the new labor costs.

For Jack Stewart, the co-owner of Aunt Mary’s, the 36 percent increase in the minimum wage created an ethical dilemma for him as an employer. Before the increase, he said, Aunt Mary’s wait staff earned a $9 hourly base wage, but took home generous tips, averaging an hourly income of $25 to $30. Line cooks, who did not earn tips, were paid $15 per hour, earning too much to be affected by the wage increase. “It’s not fair for our wait staff and dishwashers to get a $3 raise, and our cooks don’t,” said Stewart, who supported Measure FF but doesn’t believe the measure should apply to tipped workers.

Stewart’s wife, who manages most of the finances at the café, designed a system that divides the 15 percent surcharge between wait staff and kitchen staff, circumventing state laws that ban sharing tips. Diners are encouraged to leave an additional 3 to 5 percent tip, which is only distributed to wait staff.

Measure FF was sponsored by Lift Up Oakland, a coalition of workers’ unions and community groups focused on alleviating poverty. The coalition advocated for both the minimum wage increase and mandatory paid sick days for all Oakland workers. According to Lift Up Oakland’s website, at least 40,000 workers in Oakland received a wage increase through the measure.

Beth Trimarco, communications director for the East Bay Alliance for a Sustainable Economy (EBASE), a co-founder of Lift Up Oakland, said that after the wage increase, workers told EBASE that for the first time they were able to pay their rent in one payment on time. One working mother was able to take her daughter to the movies for the first time. Wage increase will also have an effect on families, possibly allowing working parents to quit a second job and spend more time with their children, Trimarco said. “Tipped or not, $9 an hour is not enough to survive,” she said of the old minimum wage.

Additional coalition members of Lift Up Oakland were asked to comment on the impact of the measure, but did not respond to inquiries by press time.

Critics of Measure FF argued that industries where workers earn tips should not face the same wage requirements as industries, like grocery stores and fast food restaurants, where the workers do not. At restaurants, the increase in minimum wage means wait staff are often getting a wage boost in addition to tips, while cooks don’t see changes in wages. California’s ban on tip credits—a system that allows employees who make tips to earn less than the hourly minimum wage, but make additional income through their tips—contributes to the disparity between front-of-house and back-of-house wages.

“I feel we’re doing the right thing,” Stewart said, noting the surcharge allows for a more equitable pay scale. Aunt Mary’s cooks benefit the most from the surcharge, gaining about $4 per hour more than they made when customers tipped the wait staff and did not pay a surcharge.

But Stewart has still had to raise prices at Aunt Mary’s to cover the increase in labor costs. He says the average number of customers the restaurant serves weekly is down 10 to 11 percent since the implementation of the higher minimum wage, compared to the same time frame in 2013, when the business had a particularly good year. He does not definitively attribute the decrease to the surcharge, but says some customers did complain about the change.

Two miles south of Aunt Mary’s, Dona Savitsky, the co-owner of the upscale eatery Flora, echoes Stewart’s concerns. “Nobody can make a living on 9 bucks an hour,” said Savitsky, who supported Measure FF on principle, but also said she can’t afford to pay all of her employees the higher minimum wage. Savitsky estimates the wait staff at Flora, who are all paid minimum wage and earn tips, make between $40 and $80 per hour, and jokes that they “don’t even look at their checks” because most of their income comes from tips.

Sitting in Flora’s empty dining room on a Tuesday afternoon, well before the restaurant’s 5:30 p.m. opening time, Savitsky said that in order to endure the increase in labor costs, she has had to take away employee perks. Previously, during their shift employees could eat whatever they wanted off the menu for free. Now, Savitsky said she is forced to charge them for the cost of the food–about 30 percent of the menu price.

“It makes us feel weird and stingy to take things away,” she said, but increasing prices on Flora’s menu is not an option. “My customers already complain that prices are too high.” Savitsky is opposed to a surcharge and feels strongly that tips should be voluntary.

Further up Telegraph, Lanesplitter Pizza decided to get rid of tips all together. Signs at the restaurant explain to customers that the business sells “living wage pizza” and ensures that all of the staff earns $15 to $25 per hour. The labor cost is built into the menu prices, and signs at the restaurant explicitly state that tips are unnecessary.

Theresa Williams, an assistant manager and server at Lanesplitter, isn’t upset about the change and said she no longer has to “depend on tips.” Williams is a single mother who has worked at Lanesplitter for over three years. She says their customers have largely supported the new policy. “The key is having the support of the community,” she said.

Vic Gumper, the co-founder of Lanesplitter, said raising wages to $15 to $25 per hour for all of his employees made the most sense because he operates five Lanesplitter locations in four different East Bay cities. Each city has passed different minimum wage ordinances, so paying all employees the same wage—which is higher than any of those required by the ordinances—and eliminating tips made the most sense for his businesses.

Increasing prices to include traditional tipping amounts has allowed Gumper to pay staff more evenly and, he said, “maximizes the benefit for the kitchen” staff, who did not previously make tips.

For Stewart, debate over the minimum wage is part of a much bigger economic issue. He remembers when he first started working as a dishwasher in the 1970’s and could afford his own apartment in Austin, TX. In April, Zumper, a tech company that helps renters find housing, reported that the median monthly rent for a one-bedroom apartment in Oakland was $2,000. After the minimum wage increase, workers with a 40-hour workweek still only make $1,960 each month before taxes.

“When you look at the disparity in the economy, increasing the minimum wage is like pushing pennies around,” said Stewart, who sees the discrepancy in pay between wealthy CEOs and workers at corporations as a major problem for the entire economy.

“Even $12.25 is a struggle for people,” Trimarco said, “We’re talking about whether or not people can put food on the table.”

Savitsky, who owns three East Bay restaurants in addition to Flora, is already thinking ahead. San Francisco and Berkeley have passed legislation phasing in $15 per hour minimum wage laws, and she knows Oakland may not be far behind. “12.25 was hard to swallow, but we could handle it,” she said. “The $15 per hour really scares me.”