The person who serves you lunch today may work for a minimum hourly wage that’s less than the price of your coffee. And no matter how generous your tip, at the end of the day, she'll take home much less in wages than what she deserves. Federal law has been exploiting workers like her for years, according to labor advocates, thanks to an ultra-low wage floor that systematically cheats servers, bartenders, hairdressers and others of a fair day’s pay.
The minimum wage for tipped workers—known as the “tip credit” or “subminimum wage” system—is just $2.13 an hour, less than a third of the regular federal minimum of $7.25. This rate is based on the assumption that combined earnings including tips will ultimately make up the difference, so total pay will approximate that of other low-wage laborers. Now, as campaigns to raise state and federal minimum wages mushroom nationwide—and with campaigns under way for a $15 per hour wage in fast food joints—the base pay of their fellow workers in diners and cafes seems even more outrageous.
A unique economic relic, the base wage for tipped workers has eroded steadily since 1996, when it was unpegged from the already absurdly low federal minimum. The crumbling value of both wage tiers over the past decade, according to the calculation of advocacy group Restaurant Opportunities Center (ROC), amounts to a yawning gap between tipped workers’ earnings today and what they would have made had the wage rates been adjusted equitably. All in all, the gap represents a net “loss” of more than $20 billion.
That loss is spread across a workforce of some six million nationwide. The subminimum applies to various tipped service sectors (based essentially on custom), ranging from bussers to massage therapists to nail salon technicians—generally some of the lowest paid, most precarious jobs. Most are in the restaurant industry, working as bartenders and servers.
The total wages earned by tipped workers typically add up to about $8.75. While that's more than the absolute base pay, advocates say that the subminimum wage structure overall undermines their earnings and economic security. According to the progressive think tank Economic Policy Institute, “Tipped workers are more than twice as likely to fall under the federal poverty line, and nearly three times as likely to rely on food stamps, as the average worker.”
(Courtesy: "Waiting for Change," by Sylvia A. Allegretto and Kai Filion, Economic Policy Institute and Center on Wage and Employment Dynamics [PDF])