Trump DOL Hid Report Showing Its Tips Rule Would Likely Cost Workers Billions

Labor Secretary Alexander Acosta. Photo: Salwan Georges/The Washington Post/Getty Images

The Trump administration says that its new “tip pooling” rule will increase the paychecks of low-wage kitchen workers. Progressives say that it will increase the profits of restaurants, by allowing them to legally steal servers’ tips.

Reason has always favored the latter claim. It is true that the Department of Labor’s proposal, unveiled in December, would allow restaurant owners to transfer servers’ gratuities to cooks and dishwashers (in places where servers make at least the minimum wage). But the proposal would also allow restaurant owners to transfer those tips to their own pockets: While the measure empowers businesses to collect their tipped employees’ gratuities — and encourages them to redistribute that cash back to workers, in a manner that cuts non-tipped workers in on the deal — the rule doesn’t actually require businesses to give the money back.

It is hard to understand why a fervently pro-dishwasher administration would omit such a requirement. After all, there is no cause for thinking that “market forces” (i.e., competition for waitstaff) would be enough to prevent employers from stealing tips — at present, even laws against stealing tips aren’t enough.

And the administration gave skeptics another reason to doubt that its new rule would work as claimed: The Department of Labor (DOL) did not publish any quantitative estimate of how much income the proposal would transfer from workers to employers, even though it was required to do so by law.

Now, we know why the DOL cut that corner. As Bloomberg Law reports:

Labor Department leadership scrubbed an unfavorable internal analysis from a new tip pooling proposal, shielding the public from estimates that potentially billions of dollars in gratuities could be transferred from workers to their employers, four current and former DOL sources tell Bloomberg Law.

The agency shelved the economic analysis, compiled by DOL staff, from a December proposal to scrap an Obama administration rule. The Obama rule banned certain tip pooling arrangements that involve restaurant servers and other workers who make tips and back-of-the-house workers who don’t. The proposal to reverse the Obama rule sparked outrage from worker advocates who said it would permit management to essentially skim gratuities by participating in the pools themselves.

Senior department political officials, after viewing an annual projection that billions of dollars in tips could transfer to businesses as a result of the proposal, ordered staff to revise the data methodology to lessen the expected impact, several of the sources said. Successive calculations showed progressively reduced values, but Labor Secretary Alexander Acosta and his team are said to have still been uncomfortable with including the data in the eventual proposal. The officials disagreed with assumptions in the analysis that employers would retain their employees’ gratuities, rather than redistribute the money to other hourly workers. They wound up receiving approval from the White House to publish a proposal Dec. 5 that removed the economic transfer data altogether, the sources said.

Projecting the precise effects of any policy is an inherently contentious endeavor, as it requires analysts to make a lot of assumptions about how the world works — and, given how complex and chaotic the world is, some of those assumptions are likely to be wrong. This is especially true in the case of the DOL’s tipping rule, since the proposal’s impact would be shaped by the decisions of millions of individual managers and customers.

So: It isn’t necessarily illegitimate for Actosta to question his analysts’ methodology. But it very much is for the Labor secretary to refuse to provide any analysis, at all, because every credible methodology leads to a conclusion that he rejects — or, more precisely, that he claims to reject.

After all, it is hard to believe that the White House would be pursuing this reform if it actually believed its own rhetoric about its effects. We’re talking about an administration that has made it harder for fast-food workers to organize; given serial labor-law violators the right to bid on federal contracts; freed employers from the burden of logging all workplace injuries; pledged to make 10 percent of all hospitality workers live in constant fear of deportation; and enjoyed a warm (and lucrative) relationship with the National Restaurant Association.

All available evidence suggests that the White House knows its proposal will take billions of dollars from workers, and give it to restaurant owners and managers — and that this is not a bug of the rule, or even a feature, but rather the entire purpose.

DOL Hid Study Showing Tips Rule Could Cost Workers Billions