Tips Don't Add Up To A Living Wage

Apr 28, 2011

By Melissa Gran

If you go out to dinner tonight, be sure to tip your server.  Why? She or he is paid far less than minimum wage and could be struggling to survive. She may be a single mother and could be living below the federal poverty line.  He almost certainly does not have health insurance or paid sick leave. It may seem like a stretch to assume all or any of these circumstances about your waitress or waiter, but research shows that tipped workers face a tenuous work life because of low wages, irregular hours, and almost non-existent benefits.

Tipped workers, who are mostly restaurant workers, are paid as little as $2.13 hourly according to federal tipped minimum wage law. The rationale for the federal tipped minimum wage law is that the expected income made from tips by workers can be converted into ‘tip credit' by employers. An employer pays workers a wage of $2.13 as long as this base wage combined with tips adds up to the $7.25 regular minimum wage.

 Although tipped minimum wage can vary by state, from $2.13 per hour in Indiana to $8.67 in towns near Olympia National Park in Washington state, it does not typically provide a living wage even when combined with tips.  A higher tipped minimum wage for food workers would address this problem. The Economic Policy Institute's policy brief on the tipped minimum wage shows that in states where tipped minimum wage is higher, poverty rates among those workers is substantially lower.  States with a higher tipped minimum wage had only 13.6 percent of tipped workers fall under the federal poverty line, compared with 19.4 percent of workers in states with a lower tipped minimum wage.

 There is some momentum to raise the regular minimum wage in the form of new legislation in several states, including Maryland, Illinois, California, Maine, and Massachusetts.   New research from the Institute for Research on Labor and Employment at the University of California at Berkeley, shows that an increase in the minimum wage would not hurt job growth, as critics have long argued. Christine Owens, executive director of the National Employment Law Project added , "Boosting the earnings of low-paid workers reduces turnover and absenteeism, increases morale and productivity, improves efficiency for employers, and does not kill jobs, even in hard economic times."

The Working for Adequate Gains for Employment in Services (WAGES) Act, introduced in Congress this past February by Rep. Donna Edwards (D-MD), is legislation that would raise the minimum wage for tipped workers. The federal tipped minimum wage has not been increased since 1991. The proposed legislation would raise tipped minimum wage in three steps: to $3.75 after 90 days; then to $5.00 after one year; and after two years, it would be raised to 70 percent of regular minimum wage, but no more than $5.50.

This legislation along with the Healthy Families Act, which would guarantee up to seven paid sick days for employees of businesses with 15 or more employees, would drastically improve the lives of restaurant workers in the United States. Under the Healthy Families Act, a tipped worker who gets ill could stay home to recuperate without lost wages or fear of losing his or her job. It would also mean these workers would not be handling food while sick, which poses a health risk to fellow workers and consumers.

Federal legislation such as the WAGES Act would help close the wages gap between tipped workers and minimum wage workers. It's time for Congress to consider the unfair wage structure of tipped work.

Listen to an audio conference CLASP recently hosted on the tipped minimum wage and paid sick days.


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