Emmer and Olive Garden
Because I was a waiter for 12 years, and because GOP gubernatorial candidate Tom Emmer's server pay cut proposal has received so much comment (almost 900 between these two Strib stories), I thought I'd add another data point to the mix.
The media has noted the candidate's assertion of $100,000 tipped employees, median server income that is less than a third or a fifth of that, but no one has checked this Emmer claim:
"Minnesota's menu prices are comparable to California and New York. We have some of the highest prices in the country. It just gets passed on to consumers."
Of course, there are so many variables in menu pricing (restaurant fanciness, cost of ingredients, etc.) that making an apples-to-apples judgment is tough. But there is at least one place we can turn to for a pasta-to-pasta comparison: Olive Garden.
The Italian food chain, which is weirdly worshiped in America's smaller burghs, helpfully provides menu prices for its various locations. I picked three: Maple Grove (the closest Olive Garden to Emmer's Delano abode); Burbank, California (closest to Beverly Hills 90210), as well as Rapid City, South Dakota, in a "tip credit" state where tipped workers can be paid as little as $2.13 an hour. That's lower than the federal minimum wage of $5.12 an hour (smaller employers) or $7.25 an hour (bigger places).
Here's the data:

At least when it comes to this corporate Italiano eatery, Emmer appears to be wrong: Minnesota prices are clearly and consistently lower than California's. (Just to be sure, I checked the OG in Clovis, near Fresno, in case Burbank seemed too glam. The California prices were identical.)
Meanwhile, South Dakota was cheaper than both, by roughly the same proportion Minnesota was cheaper than California.
I don't know if the SoDak Olive Gardens utilize the tip credit, but they are in a lower-tax state generally than Minnesota. It's possible — and this would bolster Emmer's broader worldview — that South Dakota's generally low-tax climate explains the difference; lower wages are a likely co-factor. Then again, you could also say that South Dakotans' lower pay means Olive Garden can't charge as much when those wage-earners become diners.
But rest assured, when you're dining on lasagna in Maple Grove, you are getting a bargain compared to those Burbank swells.
More like this
- Emmer campaign fires back on reporting of tip comments
- Cut minimum wage for those who get tips, says Emmer
- Emmer's minimum-wage fallout: Who makes $100,000 as a waiter or bartender?
- Emmer misrepresents the media -- did the media misrepresent Emmer?
- Charlie Quimby: Emmer totally misses the point on minimum wage issue
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I thought in our present climate that Emmer would be the candidate to beat for governor (not that he would be my choice). Add to that the lackluster alternatives. But Emmer may talk himself out of a chance at the office. He seems to be unable to avoid saying idiotic things.
I'd also be interested in food prices. While I can't confirm it, it has been long rumored that food prices are high in Minnesota. New transplants always seem to be complaining about our grocery store prices.
Another thing that hasn't been explored in this is people who are tipped by those who are tipped. So a person busing tables isn't tipped, but they are often tipped, at a pretty low rate, by the waitstaff. To move them to the super low rate of pay could mean some nights not making minimum wage. Of course, this could happen to a server too. If they make below the federal minimum, even with tips, does the employer than have to pay them the normal minimum for that night? Or do they walk away with $2.13 an hour?
And, for the record, 14 year old babysitters make like $10 an hour.
Even if food prices were as high in MN as in CA, does Emmer really believe that most restaurants would pass their labor savings on to customers?
Emmer is counting on enough low-information voters to agree with what he’s saying, voters who will rally to his defense because in their view the media is ganging up on him. Political junkies determine endorsees but political recreational users determine elections.
I know relegating restaurant workers to poverty wages seems terrible, but what about me paying a buck more for tiramisu? That's the real tragedy!
Even more pertinent are New York prices, since that state, like North Dakota, has a tip credit. I found these prices online for the Olive Garden in Times Square, a restaurant with profound personal associations since a woman who announced that she had eaten there threw up on my daughter and me at a Broadway show a few years ago.
According to the Olive Garden website, bruschetta in Times Square will set you back $9.25, artichoke dip $11.25, pizza $16.25, lasagna $18.50 and tiramisu $7.95. In other words, prices at the Times Square Olive Garden are as much as 41% higher than Minneapolis prices, in a state with a tip credit. (New York State's minimum wage is $7.25, which may be reduced to $4.65 for food service workers).
Minneapolis prices comparable to New York? Not even close.
I think all this misses the point. What the tip credit does, in the example of South Dakota above, is gives the first $4 of the tips left by customers for a server each hour to the restaurant. Only after that, do the people actually doing the serving get any of their customer's tips.
Now, you can argue that the restaurant will use that money to lower menu prices. But if cost is really someone's concern and they begrudge the server's the tips, they can just leave a lower tip. The rest of us can tip as usual. We each can make our own choice about how much to pay.
If the restaurant owner's want a tip, they should just list it on the bill instead of taking it surreptitiously out of money intended for their employees.
I would guess that rent/real estate costs are the major driver of cost here, not the wages being paid to employees.
Anyway, Olive Garden doesn't care about the tip credit or not because of it's massive size. It's the single or double restaurant that cares, because the extra wage they're paying is significant relative to their bottom line.
Great debate. It actually has my 22 year old niece, who is a server, ready to vote for the first time and against Mr. Emmer.
More citizens (especially politicians and reporters) would learn a lot from a basic economics course. Supply and demand ultimately are the primary factors responsible for the prices of everything.
Tiramisu costs more in NYC than South Dakota because people are willing to pay more for it there (i.e. the demand is higher).
And very likely Olive Garden is not willing to supply it at South Dakota prices because they would soon be out of business (i.e. they will only supply it at prices that allow them to earn a profit).
Should we compare rent prices in Coon Rapids with New York (or Coon Rapids and Uptown Minneapolis even?) and chalk the difference up to the cost of being licensed as a landlord ignoring everything else? Of course not! It is similarly foolish to do that when comparing Olive Garden prices in different parts of the country and drawing a cause/effect relationship with those prices and how servers are paid.
Reactions like "great debate" and "even more pertinent are New York prices..." are exactly why we get politicians that talk in publicist-generated sound-bites rather than in conversational tones. I'm sure Emmer now realizes the mistake he made phrasing his case the way that he did, but the reaction seen here is only going to make it less likely that we'll know as much about every candidate as possible to make an informed decision.
Also, to the person that stated that the restaurant keeps the "tip credit" I'd like to know your source for that. I've looked up the tip credit laws for several states and in all of them the employer can only pay under the minimum wage if the employee keeps all tips...the employer just gets to count the tips toward the minimum wage. In the end the employee gets paid more than minimum wage so I don't know what the big deal is.
"the employer can only pay under the minimum wage if the employee keeps all tips...the employer just gets to count the tips toward the minimum wage. In the end the employee gets paid more than minimum wage so I don't know what the big deal is."
You're saying the employer keeps all the tips until minimum wage is satisfied, then gives the extra cash to the servers? The employer then writes a tax-deductible payroll check for the tips earned by the wait staff with the money the server was tipped? And you don't think that's a big deal? To me it sounds a lot like "keeping the tip credit."
Like Wall Street, they're just shuffling the money an extra time so that it stays in fewer hands.
Mr. Schaaf:
The point of Mr. Brauer's blog and my post is not to make any sweeping statements about economics but to question Mr. Emmer's premise: that Minneapolis restaurant prices rival those in California and New York. The Olive Garden comparison is rough, to be sure, but as far as it goes it utterly fails to support Mr. Emmer's claim that local restaurant prices approach California and New York prices. They're much higher, at least in Times Square, in spite of a tip credit in New York State. As you say, a tip credit is only one of many factors that impact a restaurant's prices and imposing one in Minnesota is not a panacea for the restaurant industry.
The bigger question is why Emmer has picked this as an issue at this time? I get the minimum wage argument he presents, but is this really a burning issue right now?
I'm with Emmer on some issues like limited government. That sounds like a good campaign message. The server minimum wage issue has too much potential for damage. That and most of the places I visit are inexpensive, the servers work their butts off for pretty minimal tips. I have a soft spot for folks like that.
Mr. Gisleson -
I am NOT saying that the employer gets to keep all the tips up to the minimum wage. I am saying exactly the opposite. The employee keeps the tips...the employer just pays them less in wages because everyone understands that the addition of tips bring them up above the minimum wage. The employer gets no tax deduction for money tipped directly from the customer to the server...the only expense the employer has is the smaller hourly wage and, therefore, that is all he/she is entitled to deduct as a business expense.
Ms. Spencer -
I'll grant you that I failed to grasp the true intent of the postings which is, as you say, to expose the falsehood that is Emmer's claim that Minnesota restaurant prices are among the highest in the nation. I see that now.
I think picking the Times Square Olive Garden is stacking the deck in favor of finding higher prices in New York, though, don't you? Why not pick Buffalo, Rochester, or Albany instead? A quick check of the Buffalo numbers, for example, reveals the Minneapolis figures to be slightly higher (20-30 cents) on pizza/lasagna and the same on tiramisu. It seems a more valid comparison to me, though still very unscientific and trivial at best.
In the end, I'm not sure what difference it makes. It is unlikely that anybody offended by Emmer's statements was really going to vote for him anyway (and do we really think this is Emmer's Willie Horton?). He'll probably win in November, but that will be more for reasons that have to do with the inability of the DFL to put together a solid campaign behind one candidate (with a pinch of dissatisfaction for Obama and Dems in general) than anything Emmer stands for and/or says.
Emmer, like Palin and company, are great at diverting people's attention away from the destruction of our economy, the drug war, two wars in the Middle East that we send our Guard to, and all the rest. And you folks go for it. I don't get it but I'll stick with my issues.
Leslie Davis for Governor 2010
www.LeslieDavis.org
Mr. Schaaf, no matter how you cut it, the tip credit reduces the total compensation received by the server. How can you not see that?
And here's the flip side on the tip credit: you're turning employees into independent contractors! If the employer ends up with literally no wage obligation, then why does he/she have a right to supervise the servers?
If ALL of your income derives from tips, the customers are your employers, not the restaurant. So who is a server really accountable to if an underaged customer orders a beer?
This is the same racket the newspapers pulled when they said newspaper carriers weren't employees.
Enough is enough. Gut the bogus laws that keep employers from having to actually employ the people who work for them.
Mr. Schaaf---
I concede your point----Times Square is among the most expensive real estate in the world and restaurant prices will be high there. I assumed that when Mr. Emmer said "New York", he meant the city, not the state as a whole. Agreed, prices in the smaller NY cities you name are lower---but remember that those cities' economies have been severely depressed for years.
All of which further proves the point that restaurant prices have many drivers and the tip credit is only one of them.
Stan Daniels said: "The bigger question is why Emmer has picked this as an issue at this time?"
I don't know if this is subconscious or intentional, but Republican candidates often choose issues that set off animosities between different classes of low income workers.
They often bring up union workers as a target for their disdain, or migrant workers, or "welfare queens." Now it's restaurant workers.
My take on this is that low income groups feel much more at ease taking their anger out at other low-income groups they perceive as getting a better deal than they get. They see these other groups every day and may feel materially affected by them. But in reality they are all getting a raw deal from giant oil companies, big Pharma and Wall Street. The incompetence and greed of CEOs, the crazy-high pay and myriad perqs for the ultra-wealthy are all things the average guy never sees and doesn't even realize exist.
The real problems this country faces don't come from waiters and waitresses getting paid minimum wage. It's from things that the wealthy and megacorporations are doing that the average guy has no idea are happening, until they blow up in our faces. To wit, Madoff, Petters, poisoned toys, tainted food, the real estate bubble and the oil spill in the Gulf.
And the same thing keeps happening: in the 80s the savings and load crisis was much the same as our latest crash. In the 90s to dot com bubble was in many ways similar to the real estate bubble.
So, why is it that Emmer isn't talking about problems that dramatically affect the economy, and instead carping about tips? Well, if everyone's carping about tips and illegal immigrants, they're not carping about the guys filling Emmer's coffers with campaign contributions.
Mr. Brauer, side question. Why did you allow the Leslie Davis comment to be posted here? It is obviously a campaign ad and didn't add to the discussion (plus included a web link).
If Mr. Davis added to the discussion, then I could understand posting his comments. Otherwise I would hope that type of stuff stays out of here (unless Davis was the point of your post).
Your blog though, just curious to the thinking behind posting the comment.
Stan - I don't necessarily control the comments to my stories. It would be good if the commenters would stick to the subject. Our volunteer moderators sometimes have different standards of appropriateness.