Economics Reporter for The New York Times, Harvard Institute of Politics National Campaign Ambassador

1Huddle Podcast Episode #103

On this Bring It In podcast episode, 1Huddle’s CEO and Founder Sam Caucci sat down with Talmon Smith, Economic Reporter for the New York Times and Harvard Institute of Politics National Campaign Ambassador.

On this episode of Bring It In season four, Talmon Smith sat down with Sam and discussed the current status of restaurant workers, who are often living paycheck to paycheck, paying for classes that ultimately end up keeping their wages low.

Audio available on Apple Podcasts, Google Podcasts, and Spotify.

TOP 3 HIGHLIGHTS

Below are some of the insights Talmon Smith shared during our chat, edited for length and clarity. You can find more Bring It In podcast episodes here.

•  “When there’s a lack of rules or regulations, that is also by omission, a form of government choice.”
• “A lot of people would be surprised how many people still make below $15/hr.”
• “And one way to keep prices low is to massively suppress the pay of the workers that helped create it.”

FULL TRANSCRIPTION

Sam Caucci: So maybe we start there. Like what, I guess how did you come upon this revelation around the ServSafe and the national restaurant. What teed it off?

Talmon Smith: Yeah. So it was kind of like a part one, part two, part three thing where David actually came to me because, I think I’m remembering this correctly, he had a source from his days at the Post. I was just like, Hey, man, like, I know you don’t really cover  restaurants or anything like that, but the NRA, the National Restaurant Association, they have this, sort of odd, deaf, clever thing they got going on. I’m not sure if it’s all above board. You might wanna check it out. 

And he actually, I don’t know whether he came up to me in the office or shot me an email first, but we ended up getting together at headquarters in New York, though usually David’s based in DC and, he kind of gave me the basics that he first knew. And he was like, do you know anybody at the National Restaurant Association?

Because I had done a sort of broad based, I guess, like explanatory slash investigation, excuse me, investigative piece. back in late summer, early fall into just the widespread prevalence of wage theft and underpay, whether intentional or accidental, and just low real wages overall in the restaurant industry due in part to the sub-minimum wage that hospitality workers are allowed to be paid in most states. 

And I was like, yeah, I still know folks over there. I’m not sure how much they like me, but, we’re in touch and I started doing a little bit of digging. I kind of had my own little scooplet that I found, and then Dave did, I just started, started mind melding,he whipped out a spreadsheet. I got some tax data that wasn’t yet public from the National Restaurant Association and or on them.

 And yeah, and we just spent, a good few months, couple of months, seeing what we had here and, thanks to a lot of, really kind people talking to us both on and off the record, we were able to piece it together and then teamed up with, some really brilliant folks in our data team who, I think David might have even explained this to you before, helped us get a baseline number in terms of, just how many folks, the National Restaurant Association, were able to, have participate in these classes, which are almost boring in their brilliance, and that it only costs 15 bucks on an individual basis right? 

It’s kind of this annoyance. It’s not a huge deal, but it adds up millions and millions and millions of workers. And, you get to that 25 million dollar number that we found that the restaurant association was able to get, which more than covered their lobbying cost. So, pretty sweet deal for them. It’s also tax free, since they get to be categorized as a nonprofit. So, it’s clever. And, for others it’s real outrage. 

Sam: What surprised you most as you really dug in kind of through the rounds and rounds of work you did?

Talmon: Yeah, I mean, I ended up nerding out, especially on the legal aspect of it. I mean, I think I, as always,feel the most like a capital J journalist when I’m in the weeds with, all types of workers. And it, and it was a shock to realize that like, even, very savvy veteran cooks, waitresses, managers didn’t quite understand this connection.

That was quite the surprise, but I remember just talking to legal sources in DC, like tax experts, folks that understand the ins and outs of what 501C6 is, which is what the NRA is, it’s a business league, what they’re able to do and not do. And they’re like, man, they’re pushing it. But, it looks like this passes muster, right? 

Because as long as, the National Restaurant Association is a business league generally furthering the  interest of the industry, at large for its benefit, then it’s able to basically run a business from within the nonprofit, which leads again to that situation where, not only did they have this awesome gravy train, funded by workers going, but that it doesn’t get taxed.

It makes it that much more thrifty. So I was just surprised by the ways that the legal structures that we have in place, in our economy, allowed them to do what they did. And they have a lot of smart lawyers over there at the National Restaurant Association. And so,I’m sure to the extent that the IRS will or will not ever have a problem with this, they’ll be prepared. But so far it seems like they’re in the clear.

Sam:There were a ton of really powerful stories in the piece. And I’m sure you talked to, to many, many more than maybe didn’t even make it into their specific stories. And I remember the, it was, Mysheka from, talked about her experience at Carl’s Jr. And I think the quote was something to the effect of sitting here and working hard, I’m paying money.

I can work in this job and at the end of the day, I just still don’t even have enough, for my family, as an economics reporter. can you talk a little bit about the weight you said you made a point sub minimum wage. You know, be cool to explain to folks what that is and there’s this position of raising the minimum wage on the restaurant worker is just gonna result in less jobs and closed restaurants, and it’s gonna be bad for everybody. 

I don’t know. Can you talk a little bit, to the economics of wages in this industry and, why is there such an attack on doing anything to raise them?

Talmon: Yeah. Yeah. So just to start off right,  where you did, the sub minimum wage, as you know, many of your listeners may know, is the legal wage floor that businesses can pay any given worker, as long as they. Make tips with the idea that, well, if you’re taking one of these jobs, you’re not just getting paid, a flat rate, and then that’s whatever you have, and you take that home at the end of the week or at the end of a biweekly pay period.

No, you have customers directly giving you money. So it’s actually fine for us to lower the floor for you, because in reality, you’re gonna make way more than minimum wage anyway. For some workers, that is true. And so that bargain works. I think we’ve all, well, hopefully all of us have had the fortune of, at least occasionally, going to a pretty fancy restaurant and the young man or woman there is probably taking home, in some cases, hundreds of dollars in a night.

But I think as more of us know,  most restaurants are not fancy restaurants. And, no matter what type of restaurant or bar or, a hotel you may work at as an employee, there’s rainy days. There are wintry days in a lot of parts of the country. There are slow days. There’s often more slow days than busy days. 

And, in that case, if you’re getting paid only $2.13 in the worst cases, and there are still plenty of states, including Louisiana, where I’m from, which, in New Orleans, right? That’s a hospitality- heavy city, and that’s where I’m from, specifically, you can still indeed get paid $2.13 and it’s not as uncommon as some data might have you think. But also in New York, it’s rising, but, you make less than the $15 minimum wage, in the general New York City area.

And even that, considering the cost of living in New York can feel a lot like making only two bucks an hour. To the point of the economic arguments that look, you don’t want to arbitrarily raise wage floors, you know, in a way that is not just tied to the natural flow of markets. I’d say two things.

I think first, we like to create this dichotomy in which on the left hand we have the market, and on the right hand we have the government. And, these are different things. In reality, every single market that we have is dictated by some sort of rule or regulation, and when there’s a lack of rules or regulations, that is also by omission, a form of government choice or, carving, shaping, a business environment.

So I’d say that first, but  then secondly, I do think it is important to concede that there is a situation which a minimum wage might be at least hypothetically too high, right? And, cause mass business closure because of a sudden rise in labor costs that most businesses can’t handle.

You see in some other countries like Turkey,  a lot of economists have been critical of the large hikes and the minimum wage that leaders over there have done with the idea that, it’s well intentioned, but only going to, yeah, that it’s not going to help solve their cost of living crisis, which have to do with, in their case, a bunch of really crazy things with currency and them not potentially having enough real  resources, excuse me, to service, their, their needs as a society.

I do not think, based on the research that I’ve seen from sources I most trust, that taking the minimum wage closer to what, say the MIT living wage calculator, suggests, over a period of time that allows all businesses to adjust and be on even playing field. There is still risk, but I’d say that the risk is much lower.

And then just lastly, and then I’ll hand things back to you. I know I’ve been going on for a bit here. It is very odd when I see some responses to the reporting that I’ve done over the past year on the hospitality industry. It’s odd to see people say like, why are you even doing this reporting?

Like, nobody makes minimum wage anymore anyway. To which I say one, yes, there’s a lot of people that technically don’t make the minimum wage, but they’re a dollar or two over it. And often  that doesn’t make a real difference in people’s lives. Ben Zipper at the EPI, a think tank, has actually created this really awesome dial, which shows you how many workers in America make less than a given amount over an hour. 

And I think a lot of people would be surprised how many people still make below 15. And really, really surprised how many people make below 20 because that number is even larger. and so I think if the minimum wage didn’t matter, it wouldn’t matter.  And it would probably just be higher because nobody would care. But people do care, which suggests that there is some fear of profit margins being eaten into. So it’s a complex thing. 

Sam: Yeah. I think what you just said is so important, because again, if there’s this position of, I think you gotta start at minimum wage if you’re having discussion, around hospitality, cuz what often then happened, what has happened over the last year and a half is this position that there’s a labor shortage.

You know, you hear certain brands that will say, we can’t find workers, we can’t find workers, there’s a labor shortage. And then, that’ll shift into even when we do find them, they don’t have the right skills. So now it’s not really just a labor shortage. Labor shortage with the right skills.

And then here comes the National Restaurant Association, who’s supposed to be the advocate for the whole industry, not just the brands, but also the people in it. And what they’re putting forth is an offering that claims to be skill development, which I guess if you come back to that, you take a stutter step back.

If we’re missing skills, let’s provide skills. If it really is that, then let’s do it. But instead of doing that, you’re doing something that’s like ServSafe, which is not skill building. And in many ways, I would argue is a cruel joke to say that, you’re forcing a low wage worker back to the wage piece to have to do something that really doesn’t raise any element of their, their, their skill sets other than to just remind them of the fact that like, of things they already know, which is like, don’t go to the bathroom and then like, touch the hamburger, you know?

Talmon:Right. 

Sam: This training is not elevating a dishwasher into a sommelier by going through  this program.

Talmon: No, no. It’s certainly not. And the impression I got from both business owners, managers, and employees is that, I mean, the real training that you get is on the job from your supervisors, from your coworkers. There is an extent to which, The restaurant association does have this certification that can often feel like just a stamp, a formality.

Maybe if you’re gonna be really ungenerous. But I do understand the general impulse to have safety certification. I mean, I think the idea of food safety and health inspection and all the things of that sort are things that most people can probably get behind if you just told them offhand.

I’m not sure if you told them that a system counting tips toward the minimum wage is being fought in many places and the people pushing back against workers or being funded by the workers. I think that’s when folks get a little bit more, I guess horn.

Sam: Yeah.

Talmon: It is true on the labor shortage front that, compared to the labor force participation that we had at, say the turn of the millennium, that has gone down. But a lot of that’s structural, not cultural. Baby boomers started hitting the backs. The oldest Southern started hitting the back half of middle age and around 2000. Ever since then, considering for a long time that was our largest generation, there’s just been a lot of people retiring out of the workforce. 

And you’ve also not seen the sort of immigration levels that America experienced for much of the 20th century, so that it adds up to a generally slower growing population. It is interesting on that note, because I feel like there are others that are better experts at the ins and outs of labor availability, but, I will say that there does seem to be two brands of  hoping for an expansion of the labor force, especially when it comes through immigration. Which is, the idea that we could just have a steady supply of workers to fit our growing economy. Our economy could just structurally be healthier.

And yet I think there’s a more pernicious idea, that maybe isn’t as pro-social, that we could just get the Hondurans and the other Central Americans and the Mexicans flowing back across the border, hopefully legally, again, then they’ll be so happy to be taking $11 an hour, that’ll really cool wage pressure.

And that way we don’t have to be as challenged by the labor movement. And, that’s, I think,  a really complicated dynamic for people because I think there’s a lot of folks that, for all sorts of reasons, love the idea of immigration and the dynamism.

It brings to the economy, to society, to culture. And yet, it is true that there’s certain business interests that see the opportunity of being able to give somebody that is new to this country a quadrupling of pay. That could also help them stymie the pay of the native based workforce.

And, that brings up all sorts of awkward, both public policy and economic questions that I’m not well equipped to give a prescription for. But  it’s certainly a fascinating dynamic I’ve seen emerging over the past few years. 

Sam: You mentioned some of the feedback you’d received and I looked at the comments feed on this article.  And there you got a lot of comments. There’s a lot of comments. Yeah. I usually stay away from the comments section and stuff,  but I’m sure you are always checking.

Talmon: Little rowdy in there. 

Sam: Yeah, there’s definitely. But were there any reactions that surprised you that you didn’t expect?

Talmon:I was surprised at the level of surprise. Oh. But I was also then, I don’t know if surprise is the word, but, disheartened maybe by the misunderstanding. The continued misunderstanding. And maybe it means I need to do a better job reporting of there being a binary trade-off here of, either we get rid of tips and decide what will just be the new hire or wage floor or keep the same wage floor index, the wage floor to inflation, whatever, the public agrees upon.

Or, we just have to have our current system. and there’s a lot of states where that’s not the case. There are a lot of states where you just make the wage floor at, or at least the wage floor, right? And that’s the nature of it being a floor. But then you get tips on top right?

And it’s not just California and Oregon and Washington state.  It’s also Montana and Alaska. So, there’s a lot of different ways that ideologically diverse people can restructure this market. It is true that some people don’t want to change this system, in any sort of way.

Tips or no tips, and that’s something that I think is also interesting to wrestle with. I mean, there is a way in which the story of the 2010s in some way was that certain technologies allowed the middle class to feel, upper middle class and upper middle class to feel  maybe even affluent, right?

When you think of Uber, which is essentially just limos on demand, right? And I would say this as a person that is a relatively frequent Uber user. And I remember when it was really cheap, and I remember when everybody started getting very upset when it became more expensive. Part of that reason, though not as large of a reason as some might hope, is because there were adjustments to driver pay.

And so I think that sometimes the idea of trade-offs are just being set in stone isn’t quite true. Much of the economy isn’t zero sum, but I do think that the middle class of this country has really come to like that going out is still relatively cheap and they’re, while labor costs are not, the end all be all of what creates a price, labor is an input into price.

And, one way to keep prices low is to massively suppress the pay of the workers that helped create it. Or help create the experience. And so, that’s another interesting sort of, not just policy, but societal question for us. You know, to the extent that paying workers in the hospital industry more may raise prices, at least somewhat. Are people okay with that? 

Sam:  Some benefit more, maybe more than, more than just the restaurant owner or the. Brand owner. 

Talmon: Right, right. 

Sam: And how did the NRA respond? 

Talmon: They declined to comment on the record. Which didn’t, 

Sam: How about off the record?

Talmon: Yeah. Well, off the record, I have to keep mostly off the record, but they were not pleased, but I think they had to respect, I mean, we were respectful as always. You know, we had to represent the times in the way that they would want us to, and that we would want to, but, there were frank direct conversations, but at the end of the day, they were mostly about ensuring that we got the facts right.

And on that front, they put out some information saying that we were misleading and this or that, but they had, in our direct conversations with them or we laid out. Hey, this is what we’re going with. Let us  see if there’s any red flag here. That all went through and that’s why we published. If you got the goods, you got the goods. 

Sam: Sure, Tally, I appreciate you taking time. I appreciate your reporting on this. I mean, I think  that I had this shared with me, probably, six or seven different ways from folks, it was when, when it, when it first came out.

So much about what I think this affects. Is this conversation around future of work and wages are part of the discussion, how we skill people up or part of the discussion, how we treat people are part of the discussion. And I guess just, final question for you. What is your hope for the future of work?

Talmon: Man. Yeah, that’s a good one. I think that however we get there and my job isn’t really to dictate how we get there or what it looks like, but however we get there, and whatever it looks like, no matter whether it, culturally reads as something that leans left or leans right, or uses market mechanisms or,  uses government input.

I’m agnostic in terms of that, but, I think a society in which, the bottom 50% of this country, which currently, has an average annual income of $28,000.  I hope that the other half, so to speak of this country, can find a way to just have their standards of living raised, so that they can enjoy life, not stress free, but, with the sense of, of dignity and hopefulness and, stability. 

Because I think considering the massive amounts of wealth that capitalism has brilliantly created for us, $137 trillion or more, and total family wealth in this country, surely, surely we can find some sort of way, to, make these markets work for us, not just us work for the markets.

Sam: I appreciate your time. Thank you. 

Talmon: All right. Thank you, my man.

Topics Discussed: Restaurants, Hospitality, Wages, Economy, NRA