How Tipping Shortchanges Workers

How Tipping Shortchanges Workers

In most US states, tipped employees are guaranteed only a small fraction of the federal minimum wage.


In mid-June, Washington, DC, voters didn’t just mark a ballot in a local-government primary. They also marked an important step forward for some of the district’s most economically vulnerable workers: those who rely on tips. Residents approved a measure that, if implemented, would require tipped workers to be paid the minimum wage guaranteed to everyone else. In DC, that’s $15 an hour by mid-2020.

District of Columbia voters are not the only ones who have sought this basic standard of economic fairness for waitstaff, hotel employees, manicurists, car-wash workers, and bartenders. Eight states—Alaska, California, Hawaii, Minnesota, Montana, Nevada, Oregon, and Washington—have a single minimum wage, whether workers earn tips or not. But in the rest of the country, tipped workers can be paid as little as $2.13 an hour, so long as their tips bring up their hourly wage to the federal minimum of $7.25. That makes tipped employees heavily dependent on gratuities to get by. For waitstaff and bartenders, tips make up more than half their income.

That sort of dependence has a damaging effect on workers’ financial well-being. In states where tipped workers are paid only $2.13 an hour, nearly one in five waiters and bartenders lives in poverty; in states where they’re assured the full minimum wage, about one in 10 does. Yet there’s no discernible difference in poverty levels for non-tipped workers between these states; the lower wage appears to be the culprit.

Part of the problem is that while employers are supposed to make up the difference if hourly pay and tips fall below minimum wage, many simply don’t. An audit of full-service restaurants conducted by the Department of Labor between 2010 and 2012 uncovered 1,170 violations of the rule and recouped $5.5 million in unpaid wages.

Some tipped workers have objected to requiring a higher base wage because they feel they earn a better living through tips. But a higher wage doesn’t mean that customers won’t tip—in fact, when there’s wage equity, it appears that servers do indeed make more money. Tipped workers in states that require the full minimum wage earn 15 percent more per hour, factoring in both base pay and tips, than those in states that mandate $2.13 an hour. Nor has restaurant employment suffered in states that have abolished the lower tipped wage.

Beyond the financial hardships, tipping is a social convention that has led to social ills. When workers rely on tips to make ends meet, it renders them vulnerable to customers’ whims. If they know a server relies on their favor for their gratuities, they know she’s more likely to put up with their abuse. But workers in states that have abandoned the tipped wage experience sexual harassment at half the rate of those in states that allow them to be paid less. The greater economic security leads to greater physical and emotional security.

Tipping also perpetuates discrimination. Studies show that customers of all races tip black waiters less than white ones, no matter the level of service; conversely, white servers make more in tips than any other racial group. Customers also tip beautiful women more than those thought unattractive.

The size of a gratuity has little to do with rewarding good service, accounting for less than a 3 percent difference in how much people tip. Instead, people’s biases are in the driver’s seat.

Unfortunately, the decision by DC voters to phase out the lower minimum for tipped workers isn’t the end of the story. Many of the city’s dining establishments—backed by big money from the restaurant industry—are vowing to stop the measure from ever taking effect.

But similar changes could soon be on their way elsewhere. Organizers in Michigan put the same question on their ballot for November. Activists are pushing for the Massachusetts Legislature to increase the minimum wage for all workers in the state. And in New York, Governor Andrew Cuomo convened hearings on whether the state should do away with its lower tipped wage.

What such hearings would show is likely what eight states have already realized: The evidence is overwhelming. It’s time to eighty-six the tipped minimum wage.

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