Will AZ's Prop 138 Save Restaurants Money or Destroy Tipped Wages

Labor is one of the most expensive parts of running a business, and in this economy, a lot of business owners are exploring ways to make ends meet.

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With wages rising, food and other goods prices have also increased, creating a storm of explosive prices. Many restaurants and businesses are passing the cost onto customers by shrinking portions and increasing product costs, which has caused many diners to stop dining out.

KEEP READING: Tipping Is Getting Out of Hand! Why Would THIS Business Ask for a Tip?!

Proposition 138 could shift some of the cost of labor away from their bottom line and help lower prices. But will it come at the expense of the restaurant servers?

Title: “Arizona’s Proposition 138: Tipping the Scales on Wages”

The dichotomy between rising wages and paying a living wage has spurred a heated debate across Arizona.

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Proposition 138—the Wages for Tipped Workers Amendment is on the ballot this year. What is this contentious ballot measure really about, and who benefits?

What’s at Stake?

If passed, Proposition 138 would allow employers to pay their tipped workers 25% less per hour than the state minimum wage.

But there’s a catch: this reduction applies only if the employees’ tips, when added to their wages, exceed the minimum wage by at least $2 for all hours worked. In other words, if your tips put you over the threshold, your employer can legally pay you less.

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This is confusing, and I don't see this ending well for workers. It could also impact business owners in ways they haven't yet considered.

Who Benefits Prop 138?

Business Owners will most likely benefit. Labor is one of the most expensive parts of running a business. If the bill passes, supporters think it would ease the financial burden on struggling businesses, especially small, family-owned establishments; it could make all the difference to struggling restaurants.
Diners on a Budget: Ideally, lowering the cost of labor would drop the price of meals and make dining out more affordable. (I'm a little cynical. Will restaurants lower prices or pocket the difference?)

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Who Gets Hurt?

Tipped Workers: It's hard to see how this could possibly benefit servers, bartenders, and other tipped workers. Servers are the backbone of the dining experience, and a 25% pay cut could hit hard, especially for those already scraping by.
Income Inequality: Critics worry that Proposition 138 perpetuates a two-tiered system. Tips subsidize lower wages and make up the difference. This could make it impossible for servers to find an equal playing field.

Seeking Balance in Arizona Restaurants

Understandably, everyone is looking for ways to save money, but this might not be the plan. Servers who've been in the game a long time may decide to move on to other opportunities.

While a business may save money with this change, staff turnover and inexperience may undermine any savings benefit from this bill.