Since President Obama’s State of the Union address in January, there has been a great deal of focus on wages. While the unemployment rate has declined since its height at the recession, those that are finding the little work that is out there are often forced to work in lower wage jobs. There has been efforts to address the minimum wage in hopes to lift wages for everyone. Several local and state governments have raised, or are in the process of raising, their minimum wages. President Obama has issued an executive order to raise the minimum wage for federal contractor employees to $10.10 an hour.
Lost in the discussion of the minimum wage are the wages of tipped workers. While the Fair Labor Standards Act requires that employers pay at least the federal minimum wage, the restaurant employers lobby convinced the federal government to consider the money earned via tips. This created a provision allowing employers of tipped employees to pay an hourly wage of half the minimum wage as long as the tips earned made up the difference. This remained the law until 1996, when legislation froze the rate based on the then current federal minimum wage of $4.26 per hour. Since then, the tipped wage minimum has not increased from $2.13 per hour, or 29 percent of the current federal minimum wage.
While federal law requires employers to cover the gap if the tips earned do not reach the current federal minimum wage of $7.25 per hour, many employers do not, making tipped workers more dependent on tips that vary by the size of the bill, the season and the mood of their customers. Currently seven states require employers to pay the full state minimum wage before tips, with several more that require paying more than the federal minimum (either a percentage or a dollar amount) before tips. However, there are 19 states that still do not require employers to pay anymore than the federal minimum of $2.13 per hour for tipped workers. These are also the states whose minimum wage is equal to the federal minimum.
As the cost of living has increased and wages have remained stagnant, tipped workers are feeling the pinch the hardest. Labor unions and restaurant worker groups have long been pushing for an increase in the minimum. The president has stated support for including an increase in the tipped wage minimum in his discussions of raising the minimum wage, something that would require Congressional action. Democratic Senator Tom Harkin, along with Representative George Miller, introduced a bill last year that would increase the minimum wage to $10.10 per hour, as well as raise the tipped minimum wage to eventually 70 percent of the minimum wage. The increase would be gradual, with a 95 cent annual increase until the minimum is reached.
Needless to say, the National Restaurant Association does not support the bill.
They claim that the average wages for restaurant employees far exceeds the minimum wage (when tips are included) and that increasing it would lead to higher costs and more layoffs and ultimately bad for the economy. A study by an economist at the University of California at Berkley showed the average hourly rate (including wages and tips) for the majority of the estimated 3.3 million tipped workers was $9.12 per hour, much lower than the National Restaurant Association’s claim of $16 per hour. Furthermore, data shows that for those states that have a minimum wage higher than the federal rate and require the full minimum wage prior to tips, tipped workers have a lower poverty rate than those in states with the $2.13 tipped worker minimum is allowed.
In other words, increasing the minimum wage is good for the economy.
Nearly 70 percent of tipped workers are women. Many tipped workers have families and, because of the low wages, still rely on some form of public assistance such as food stamps to make up the difference. These aren’t just waiters and waitresses. These are bellhops, bartenders and manicurists who are working longer hours via multiple jobs and still living in poverty. In the meantime, efforts to increase the minimum wage for everyone are being stymied by the Republican controlled House of Representatives, who continue to claim such an increase would be bad for businesses and ignore the needs of the employees who help those businesses keep their doors open.
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