Anybody out there work for tips? Or related to someone who works for tips? Or patronizes someplace where people work for tips?
Then this is an issue that affects you. Follow along as I try to unpack tip wages, tip credits, minimum wage and living wages for the fastest growing segment of US workers.
Basically, the federal minimum wage is $7.25 an hour, but the wage that an employer can pay a tipped worker, if they meet certain requirements — and the bar is pretty low — is $2.13 an hour. It’s been $2.13 since 1991.That amount of money that an employer doesn't have to pay because an employee is tipped is called a "tip credit". Basically, that tip money is considered part of a wage and it is subsidized by the customer. The $2.13 an hour that employers are required to pay is called the subminimum wage.
Sylvia Allegretto co-director of the Center on Wage and Employment Dynamics at UC Berkeley
photo credited to WonderWhy on Flickr
An employer of a tipped employee is only required to pay $2.13 an hour in direct wages if that amount plus the tips received equals at least the federal minimum wage, the employee retains all tips and the employee customarily and regularly receives more than $30 a month in tips. If an employee's tips combined with the employer's direct wages of at least $2.13 an hour do not equal the federal minimum hourly wage, the employer must make up the difference.
US Dept of Labor Fair Labor Standards Act (emphasis mine)If someone could elucidate the italicized portion, I would be grateful.
Follow Me Across the Squigglies to Your Table
The Economic Policy Institute at UC Berkeley recently published a study, Twenty-Three Years and Still Waiting for Change Why It’s Time to Give Tipped Workers the Regular Minimum Wage authored by Sylvia A. Allegretto and David Cooper.
The authors also illustrate why you should care about the tip wage, the tip credit and minimum wage:
Employment in the full-service restaurant sector has risen nearly 86% between 1990 and 2013. Overall job growth in the private sector was 24%. These jobs are making up an increasingly large segment of the population.
Tipped workers live in poverty at a rate nearly twice that of non-tipped workers. Also, poverty rates are lower for tipped workers in states that require the full minimum wage.
Nearly 46% of tipped workers and families receive public benefits. 35% of non-tipped workers and their families are on public assistance. This means that taxpayers are subsidizing wages.
First, Let's Ask The Wall Street Journal, Shall We
"Tips Don't Add Up for Most Waiters and Waitresses" was written by Jo Craven McGinty on August 8, 2014. The subtitle is "Some Live in Poverty, While Median Income Falls Below Average".
"Nearly 15% of the nation's 2.4 million waiters and waitresses live in poverty, compared with about 7% of all workers. They are more likely to need public assistance and less likely to receive paid sick leave or health benefits—and their ranks are increasing. From the start of the recovery in 2009 until June of this year, restaurant jobs have increased by 13%, while all other jobs are up 5.5%"In the interest fairness, the National Restaurant Association disagrees. Of course, they also spent $2.2 million in lobbying efforts to fight any minimum wage increase last year.
"No one is making $2.13 an hour," Scott DeFife, executive vice president of policy and government affairs for the National Restaurant Association, a trade organization that opposes raising the minimum wages, said in a statement. "Every tipped worker is guaranteed at least the minimum wage of their state, more than half of which have increased both the tipped wage and minimum wage to above federal levels."Even given the NRA's opposition and granting their numbers, a disparity exists.
"[T]he Bureau of Labor Statistics reports the median wage for waiters and waitresses is $8.94, including tips, although the National Restaurant Association, based on its own surveys, says that number is low. The median for all other workers is $15.84."The Economic Policy Institute, a left-leaning think tank, found in 2011 that tipped workers are more than twice as likely as other workers to fall under the federal poverty line.
Make No Mistake! Operating Profits In Hospitality Are Thin
It is perfectly understandable that restauranteurs are concerned about remaining in business. There seems to be, however, a lack of reliably unbiased data on the effects of eliminated the tip wage on profitability.
I am keenly aware of the fact that the tip wage issue does nothing to address the pay of those in the Back of the House who are preparing the meals and washing the dishes. There is a legitimate point to be made that addressing pay for servers while in effect ignoring their untipped peers could lead to unrest in the workforce.
In my experience, it is common for cooks and dishwashers to complain that servers take home more than they do. Of course, this is countered by the fact that their income is more predictable.
Fear of A "$25 Hamburger"
From an article published by Zagat:
In other words, as a big-name restaurant owner who wished to remain anonymous warns, “Get ready for the $25 burger.”This view is countered by Sacramento business owner Sean Kohmescher. Kohmescher says that modest price increases haven't aroused many complaints from customers.
“If you talk about 25 cents, what’s that in a parking meter? That’s 10 minutes of parking. In today’s day and age, 25 cents doesn’t really buy a lot. We generally over-think it and overreact to it far more than the customers. We’re just sensitive. We don’t want to have to raise prices.”Then again, restaurants could do what Alice Watters and Chez Panisses in Berkeley are doing. The restaurant has been charging a service fee since 1989 that has gone toward raising the paychecks of all it's employees.
Allegretto and Cooper Disagree
Again from Sylvia Allegretto:
"You can just look at all the variation that’s out there — all these states that have $2.13 an hour all the way up to Washington state, where tipped and regular workers are making well over $9 an hour. According to the National Restaurant Association, all these places that don’t have a subminimum wage shouldn’t have restaurants. But they do."
And Now For Some Industry-Funded Fear Mongering
"The Employment Policies Institute, founded two decades ago, is led by the advertising and public relations executive Richard B. Berman, who has made millions of dollars in Washington by taking up the causes of corporate America. He has repeatedly created official-sounding nonprofit groups like the Center for Consumer Freedom that have challenged limits like the ban on indoor smoking and the push to restrict calorie counts in fast foods."
5:40 PM PT: An UPDATE from graits4:
Just a note regarding your image, though:
Ohio's tipped wage is tied to our own minimum wage and goes up every so often (it's in our state Constitution now. Yay?). It's now $3.98.