Ending US Subminimum Tipped Wages can Reduce Poverty and Inequality

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October 27, 2022 11:46AM EDT | Dispatches

Ending US Subminimum Tipped Wages can Reduce Poverty and Inequality

Workers’ Right to a Living Wage on the Ballot this November

Lena Simet

Senior Researcher and Advocate, Poverty and Inequality

LenaSimet

Matt McConnell

Researcher, Economic Justice and Rights Division

mcconnell_m

Restaurant worker speaks during a press conference calling on Congress to abolish minimum way for tipped workers in Washington DC. — Francis Nwokeji, a restaurant worker from New York, speaks during a press conference calling on Congress to abolish the sub-minimum wage for tipped workers in Washington DC, February 7, 2022. © 2022 Allison Bailey/AP Photo

Voters in Washington, DC, and Portland, Maine, can decide this November to eliminate a two-tiered minimum wage system that has denied many workers their right to a living wage.

Under the Fair Labor Standards Act, employers can pay tipped workers just US$2.13 an hour, rather than the federal minimum wage of $7.25. If tips don’t bring workers’ total earnings to at least equal the federal minimum wage, the employer must make up the difference. In practice, however, this mandate is often ignored. A federal review of employment records from 2010-2012 revealed that 83.8 percent of full-service restaurants improperly calculated wages for tipped workers or committed other wage and hour violations.

Eliminating Two-Tiered Minimum Wages for Tipped Workers Can Reduce Poverty and Inequality

Under the Fair Labor Standards Act, employers can pay tipped workers just $2.13 an hour in cash wages if their tips add up to the federal minimum wage of $7.25. But this practice leaves many tipped workers vulnerable to exploitation and abuse.

State Minimum Cash Wages for Tipped Jobs

Note: Some states have different minimum wage scales based on region, sector, or employer size. This chart shows the lowest minimum cash wage that tipped workers could earn in the state. In New York State, for example, tipped workers' minimum wage rates vary by region. This chart shows the lowest minimum cash wage ($8.80), which applies to food service workers outside of New York City and Nassau, Suffolk and Westchester counties.
Source: U.S. Department of Labor, Wage and Hour Division (last revised January 1, 2022).

While some US states abolished this two-tiered wage system, a direct legacy of slavery, 43 states still allow subminimum wages for a tipped work force that is nearly 70 percent female and disproportionately Black and brown. According to the Bureau of Labor Statistics, restaurant workers occupy four of the ten lowest-paid occupations in the US. These workers are at least twice as likely to live in poverty, with even higher rates among workers of color.

The Economic Policy Institute, the One Fair Wage campaign, and others have published research showing that tipped workers in states that eliminated the subminimum wage enjoy higher earnings, face less harassment on the job, and are less likely to live in poverty. It can also reduce race and gender inequities perpetuated by the tipped wage.

In DC, Measure 82 would eliminate the state’s tipped subminimum wage of $5.35 an hour, raising pay to the state’s $16.10 minimum wage by 2027. The measure would not prohibit tips or tipping, but would ensure that a basic minimum wage was paid by an employer. In Portland, Question D would eliminate the subminimum wage and increase the minimum wage to $18 an hour by 2025, directly affecting 1,500 tipped workers and one-fourth of the working population.

These ballot initiatives are long overdue since subminimum wage workers are entitled to a living wage and should not have to rely on the arbitrariness of tips to enjoy that right.