Lawmakers in New Jersey are considering an increase in the minimum wage for tipped workers, a move those in the food service industry warn will hurt both restaurants and their employees.

The current law allows an employer of a tipped employee to count the tips received by the employee towards compliance with the state’s $15.49 an hour minimum wage.

The eventual elimination of the tip credit by A5433 will require that the employer pay the full amount of the minimum wage without regard to any tips received by the employee. The credit would be fully removed by 2030.

The New Jersey Business and Industry Association is strongly opposed to the plan and warns that it could force restaurants to cut the number of employees or even close altogether. 

“Ending tipped wages is a recipe for disaster,” says the vice president of human resources at Morey’s Piers, Denise Beckson, who is also a member of the association’s Board of Trustees. “It will hurt restaurant workers, owners and the general public. This is a no-win proposal that will negatively impact those it seeks to help.”

A restaurant group that owns three locations in the state says the bill would put immense financial strain on small businesses that are already operating on razor-thin margins.

“When we say this, we truly mean it. This bill is not serving anyone,” the team behind Lita, Judy’s, and Heirloom Kitchen warned in a Facebook post. It said it could bring widespread job loss, reduced hours, and higher menu prices.

“It threatens the flexible, high-earning potential that tipped employees currently enjoy, and could drive many beloved local establishments to close their doors for good,” the post continued.

The average New Jersey server currently earns $22.40 an hour with tips, much higher than the state’s minimum wage, according to the restaurant group.

Opponents say a similar plan in Washington D.C. has devastated the restaurant industry there, with at least 72 closures and thousands of job losses blamed on the minimum wage increases.

Voters in Massachusetts overwhelmingly rejected a similar plan last year after hospitality workers came out against it over concerns of job losses and lower tips.

The New Jersey Restaurant and Hospitality Association said the legislation would mean a 200 percent increase in wages that small businesses would have to pay workers. The group members rallied at the state house in Trenton on Thursday morning to oppose the bill ahead of a hearing.

New Jersey Policy Perspective senior policy analyst Peter Chen spoke in favor of the measure at the hearing.

“Why do we have a tipped wage in the first place?” Mr. Chen asked the committee.  He says tips used to meet minimum wage requirements has led to a two-tier employment system and increases the likelihood that workers can be exploited. “The tipped wage is a relic,” he added.