People Who Work For Tips Are Twice as Likely to Live in Poverty

Written by Bryce Covert

People who work for tips are far more likely to live in poverty, according to a new report from the Economic Policy Institute (EPI).

The poverty rate for workers who don’t make tips is 6.5 percent, but the rate for tipped workers is 12.8 percent — meaning that people working for tips are nearly twice as likely to live in poverty. They are also more likely live in low-income households, as 47.2 percent of tipped workers are in families that make less than $40,000 a year, compared to 30.5 percent of the general workforce.

Given all this, it’s not surprising that tipped workers are more likely to rely on public benefits such as food stamps, housing and energy subsidies, the Earned Income Tax Credit, school lunch subsidies, and the Supplemental Nutrition Program for Women, Infants, and Children (WIC). About 46 percent of tipped workers and their families use these programs, compared to 35.5 percent of those who don’t work for tips.

One big reason for the high poverty rate among tipped workers is that they have a lower minimum wage than all other workers. Since 1991, employers have been able to pay workers the same base rate of $2.13, although they are supposed to make up the difference if a worker’s tips don’t bring her total haul to $7.25 an hour. Tipped workers still end up making less, though: they have a median wage, including tips, of $10.22, compared to $16.48 for all workers.

But some states have different policies. Thirty-one require a higher tipped minimum wage than the federal $2.13 level, either at the same rate as the minimum wage for everyone in the state or one that is lower. Seven states treat all workers, tipped or non-tipped, as the same under their minimum wage laws:

In those seven states where tipped workers make the regular minimum wage, their poverty rate is also significantly lower. Those who work in a state with the $2.13 tipped minimum wage have a 14.5 percent poverty rate, while those who work in a state where there is no different minimum have a rate of 10.8 percent. Median wages for tipped workers are also higher where there is no wage difference: it’s $9.80 in $2.13 states, but $11.19 in those that require the regular wage.

More states could join the group of those that guarantee the same wage for all workers. Hawaii, which recently raised its minimum wage, will have the new level apply to all workers when it goes into effect. And ballot measures in Michigan and Washington, DC as well as legislation in Florida and Pennsylvania, would get rid of those places’ lower tipped minimum wages. Those states shouldn’t worry about it hurting job growth: a report from ROC United found that employment growth in the restaurant industry was actually above average in the states that have the same minimum wage for tipped and non-tipped workers. Job growth for tipped workers themselves is higher in states where they make more than $5 an hour and even higher where they make the regular minimum wage.

Some individual restaurants have also decided to do away with tipping and just pay everyone a higher minimum wage. There are high-end restaurants in New York and the West Coast doing it, but they have been joined by a bar in Washington, DC and a barbecue restaurant in Kentucky. The owners say the switch lowers turnover and improves both service and revenue.

The EPI report also illuminates who is making lower wages working for tips. Of the 4.3 million tipped workers in the country, two-thirds are women. More than 60 percent are employed in food service, often as waitstaff and bartenders. And while tipped workers tend to be younger than the overall workforce, just 12.6 percent are teenagers, while 62.8 percent are at least 25 and nearly 40 percent are 40 or older. A quarter of them are parents.

This post originally appeared on ThinkProgress

Photo Credit: Thinkstock


Donna F.
Donna F3 years ago


Jane R.
Jane R3 years ago

People who eat out pay an already high price for having the food cooked and served to them, so why are the expected to leave tips to pay the servers? This is the responsibility of the employer. They are supposed to pay their workers, not the customers. If the price of a meal goes up so tips are done away with then people will eat out less often then the whole establishment will suffer. Restaurants will all go out of business. This might not be a bad thing. It would make people cook healthy meals at home and they would save money.

Eric Lees
Eric Lees3 years ago

But the minimum wage is not the real big issue, sure it distorts the job market and leads to higher unemployment especially among rhe young and unskilled.
The bigger issue is purchasing power which has been steadily eroded since the 1970s. It is much harder to raise a family on a blue collar job today than it was when we had sound money.
The great QE experiment from the FED and supported by Obama as well as Congress has made many on Wall Street quite wealthy but that money has not trickled down to the other 99%. All the rest of us get is inflation.
Instead of being well into a real recovery after 5 years we are still on the easy money morphene IV.

Eric Lees
Eric Lees3 years ago

That makes sense as most tipped workers are in lower income fields so it's not a valid comparison. Strippers would be the only higher wage field that works on tips that I can think of. How do tip vs. non tip workers compare in the same field?

Camilla Vaga
Camilla Vaga3 years ago


Maria Teresa Schollhorn

Thanks for the article.

Thomas Bergel
Past Member 3 years ago

The entire concept of tipping is an anachronism that should have faded into obscurity years ago and It would have if it wasn't supported by the corporations that enjoy the benefits of employing people at slave wages and depending on the generosity of their customers to pay for what is rightly their responsibility.

Elizabeth F.
Elizabeth F3 years ago

makes sense to me

Teresa W.
Teresa W3 years ago

Arild is right!

Alexandra G.
Alexandra G3 years ago

sad :(