Is it time to get rid of the tipped minimum wage?
When it comes to tips, your waitress is getting a raw deal.
That's because tipped workers -- waiters, waitresses, bartenders and the like -- earn a baseline wage of $2.13 an hour in most U.S. states, a rate that hasn't budged since 1991. While tips are supposed to push their wages up to the regular minimum wage for other workers -- $7.25 an hour -- tipped workers are more likely to live in poverty and rely on government aid, according to a new study from the left-leaning Economic Policy Institute.
Even after accounting for tips, these workers' incomes typically fall in the bottom quartile of all U.S. wage earners, the study found. As a result, the poverty rate for tipped workers stands at almost 13 percent, or about double the rate for non-tipped workers, and 46 percent of tip-dependent employees rely on public benefits. While advocates for the tipped wage argue that employers have to make up the difference if a waitress' tips-plus-hourly rate don't add up to $7.25, wage violations are common, the study's authors said.
"The current system needs to be changed," said David Cooper, an economic analyst with the EPI, on a conference call to discuss the findings. "The law requires that if tip doesn't add up to full minimum wage, the employer has to make up the difference, but in reality, the system is fraught with problems."
In a recent investigation of 9,000 full-service restaurants by the U.S. Department of Labor's Wage and Hour Division, about 84 percent of restaurants had some type of violation. A high degree of those violations were related to tipped and regular minimum wage issues, said Sylvia Allegretto, a co-author of the paper and an economist and co-director of the Center on Wage and Employment Dynamics at the Institute for Research on Labor and Employment at the University of California, Berkeley.
The issue is also one that impacts women, given that they make up two-thirds of all tipped workers. And within the tipped economy, there's also a gender-based pay gap, with women earning a median wage of $10.07 an hour, compared with $10.63 per hour for men, the study found.
"Most tipped workers don't work in upscale restaurants," Allegretto said. "Think of a diner in rural Pennsylvania."
While there are some efforts to raise the tipped wage, with President Obama and Congressional leaders proposing to tie the tipped minimum wage to 70 percent of the full baseline wage, it's facing opposition from the National Restaurant Association, which argues that eateries would cut hours and hike prices as a result.
Yet in California and the handful of other state that have abolished the tipped minimum wage on their own, the restaurant industry is doing just fine, the authors said.
"The viability of the restaurant industry doesn't hinge on the $2.13 minimum wage," Allegretto said.