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FAQ: The Living Wage Adjustment
What is a Living Wage Adjustment?
Popolo’s Living Wage Adjustment (LWA) is an initiative we’ve undertaken to ensure all our employees earn at least a living wage. We believe a living wage to be $15.00/hour. This program involves a menu price adjustment using a service charge, to wit, The Living Wage Adjustment.
Where does the money to ensure the Living Wage come from?
This payroll adjustment is funded by a service charge on every patron’s food and drinks, equivalent to 6% of the purchase price.
Is this legal?
In a judgement returned by the State of Vermont Division of Taxation, the addition of a service charge to restaurant bills is legal under a set of conditions. These conditions are strictly enforced by Popolo.
Is the Living Wage Adjustment applied instead of tips?
No. Though Popolo cannot and does not require tipping from its customers, gratuities are customary at most restaurants. The customer is free to offer gratuities at their own discretion. A gratuity is completely voluntary but is a traditional and significant part of a server’s income.
Is the Living Wage Adjustment voluntary, too?
No. The Living Wage Adjustment is a charge like any other charge on a customer’s bill.
Customers can no more decline paying the Living Wage Adjustment than they can choose not to pay for a hamburger or taxes.
Won’t customers just stop coming or, if they come, just penalize the tipped waitstaff with smaller gratuities?
After two weeks of this new policy, a careful analysis of attendance, sales, and tipping since starting tells us that our customers embrace the Living Wage Adjustment; more customers, greater sales, and a steady or higher percentage of tipping tells us that our customers agree with our decision and show it with their purchasing power. Those who disagree and want to demonstrate that disagreement are perhaps not our audience though we welcome their patronage with open arms. But those who make unsubstantiated claims that obviously this will hurt our servers are mistaken. Fear of progress is its worst enemy. We don’t speak for other restaurants in other towns with other customers. But Popolo’s peeps are aces and not only talk the talk, they walk the walk. We are building a relationship that’s based on respect. Building something good is pretty much the best we can do.
Who owns Popolo?
Popolo is owned by a group of 26 Shareholders who formed the company so that Bellows Falls could have a full service restaurant in the historic Windham Hotel building. Everyone who works at Popolo is an employee of that company, and our policies are set by its shareholders. Some shareholders work here, most do not. Remember, by law the shareholders can’t receive any of this added revenue. It all goes to our employees.
Why doesn’t Popolo just pay its employees more and skip the LWA?
Popolo survives in a tiny Vermont village on razor thin margins. To date there have been no profits to distribute to shareholders. Employees are all paid wages and no one earns a particularly high hourly wage or salary. There is no demonstrable pay inequality between management and labor. There is no financial redistribution that could increase employee wages without raising customer prices.
So why didn’t Popolo just raise prices to the customers?
We could have done that but we chose not to do so. Here’s why: by law, all the revenue earned from The Living Wage Adjustment must be distributed to employees and cannot be distributed to the company or its owner/operators. In this way, the customer knows exactly where this additional charge is going. Moreover, this charge is not subject to Meals and Rooms or Liquor Tax that are 9% and 10%, respectively. This saves the customer some of this increase in price.
Why should customers pay Popolo’s employees, isn’t this the responsibility of the restaurant?
Not surprisingly, our customers pay every Popolo expense: electricity, rent, ingredients, printing, heat, taxes, etc. Every single cost is paid from the revenue provided by our customers. How could it be otherwise? This is necessarily true of payroll, too, so when payroll needs to be increased and there is no other income source to pay it, prices have to be increased, proportionately. Customers might not enjoy the increase in prices but it is a reality, the impact of which we have attempted to mitigate, contain, and explain using this strategy.
Is there any other reason to have a Living Wage Adjustment?
The idea of adjusting our employees’ wages to match the times in which we live is an important concept to digest. The steady decline in the real income of low wage employees since 1968 is a fact undisputed by economists. Meanwhile, a steady increase of income to the top 1% is also undisputed. As a tiny restaurant we can do very little to rectify the recent and swift polarization of wealth in America. But we can help our employees stay in the game. It makes us a responsible employer. While the impact to our customers is small for each transaction, the overall benefit in aggregate to our employees is critical. Our customers have verified this truth since we have enacted the Living Wage Adjustment. They show up and they tell us this is good.
Is Popolo demanding all business pay their workers at least $15.00/hour?
No. Every business is different and business owners feel differently than we at Popolo feel. Owners need to decide for themselves what the appropriate path will be for their businesses. But as a company founded on the idea that we will help bring good into our community, it seems incumbent on Popolo to make this change. In fact, it may turn out that at some point we will change our policies again to suit a different time or need in our organization. Being responsive to the community, our customers, our employees, and our business will help propel us into the future in the best way possible.
Is there any scholarly report that says raising employee wage is a good idea?
As a matter of fact there is. A group of economists at the University of California at Berkeley working at the Institute for Research on Labor and Employment released a study titled “The Effects of a $15 Minimum Wage in New York State” You can read the study at the link below but it’s conclusion was as follows.
“Based on our analysis, we conclude that the proposed minimum wage will have its intended effects in improving incomes for low-wage workers. Any effects on employment and overall economic growth are likely to be small. The net impact of the policy will therefore be very positive.”
Yes. Popolo is very grateful for the massive support it has experienced in response to this program. We are a committed member of our community and are sustained both financially and in spirit by this community support. We thank all of our customers and friends around the county, state, and, yes, around the country for standing side by side with our decision to value our employees.
Following is the first press release on the topic of The Living Wage Adjustment
FOR IMMEDIATE RELEASE
RESTAURANT HELPS JUMPSTART THE $15 MINIMUM WAGE
Vermont’s Popolo Restaurant Tackles The Issue With Its “Living Wage Adjustment.”
Bellows Falls, VT – With a national dialog raging about a higher minimum wage, a small town Vermont restaurant has a new mission: to ensure that every one of its employees earns at least $15.00 per hour.
In 2012, friends of Bellows Falls decided it needed a downtown restaurant. The village’s only full-service eatery had burned down years ago. Meanwhile, a historic building sat mostly unused for decades. The group put two and two together and hatched a business plan. To raise money they took their idea to the community and soon, with twenty-five investors, they opened Popolo, with farm-to-table cuisine and an intimate music venue.
To address the minimum wage, Popolo’s directors have once again reached out to the community for support. The plan is simple; ask each diner for an additional contribution based on a fixed percentage of their purchase. Popolo calls this charge “The Living Wage Adjustment.”
“Six percent is the magic number for Popolo,” says Gary Smith, the restaurant’s general manager, “I’m sure it’s different for every employer but based on our previous experience, six percent will cover the pay increase here.”
While servers almost always manage to earn a reasonable wage by the inclusion of gratuities, now there’s the Living Wage Adjustment for everyone else.
Asked why Popolo didn’t just raise its prices, Mr. Smith makes it clear, “That strategy also adds more tax to the bill. We think explaining the plan with complete transparency not only offers a better deal to our customers, it reminds them they’re all helping to guarantee our workers enough to live.”
Smith has consulted with the Vermont Department of Taxes who agree that, as long as the restaurant follows some simple rules about the notice and disbursement of this revenue, the charge will not be subject to Rooms and Meals Tax so all of the additional revenue will go to employees.
The topic of a $15.00 Federal minimum wage is receiving much attention nowadays with Presidential Candidate, Senator Bernie Sanders of Vermont one of the most vocal proponents. Though Vermont’s minimum wage is now $9.60 per hour, the Federal minimum wage is only $7.25. Some cities have already increased the minimum wage with an eventual target of $15.00 per hour.
Popolo and its shareholders feel that waiting for the increase doesn’t fit with the company’s principles. They’ve adopted the Living Wage Adjustment as an immediate remedy.
“Many small contributions make this improvement possible,” Smith says, “There aren’t many diners who will balk at spending a couple dollars more to secure quality of life for our workers. It’s part of the cost of dining out.”