The disturbing history of tipping in the U.S.: "It's literally a slave wage"

Surviving an Unlivable Wage

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The act of tipping is said to have started in feudal Europe, when strict social hierarchies prevented any real kind of social mobility and it was a common practice among aristocrats to tip servants. It wasn't brought over to the U.S. until the 19th century, and was only popularized after the Civil War. But in this country, instead of being additional compensation on top of a regular  wage, it functioned as an immediate and racist solution for employers who did not want to pay recently freed black slaves.

"After Emancipation, the restaurant lobby demanded the right to hire newly freed slaves, mostly black women, not pay them anything, and have them live entirely on this new idea that had just come from Europe called a tip,"  said Saru Jarayaman, director of the Food and Labor Research Center at the University of California, Berkeley and co-founder of the nonprofit advocacy group Restaurant Opportunities Centers United.

Surprisingly, in those early years, many considered tipping undemocratic and therefore un-American because of its roots in the aristocracy. "Tipping, and the aristocratic idea it exemplifies, is what we left Europe to escape. It is a cancer in the breast of democracy," wrote William Scott in 1916. But the railway and restaurant industries fought for using tipping as their employees' full wages, to exploit their African American labor force, and they won.

This legacy of slavery was institutionalized with the New Deal-era Fair Labor and Standards Act of 1938, which introduced the country's first federal minimum wage of $0.25. The original legislation excluded hotel, restaurant and other service workers, but in 1966, significant amendments finally included them. At the same time, though, the amendments introduced a sub-minimum wage, allowing employers to pay tipped workers a base wage below the federal minimum so long as the tips and wages added up to the minimum wage. 

While some states have set higher minimums, the federal "tipped minimum wage" has stagnated at $2.13 an hour since 1991 — and inflation has steadily eroded its purchasing power. 

"It's unconscionable. It's literally a slave wage," said Jaramayan. "I do think it's important to recognize that this is a 70% female workforce. And so I do think, in thinking about how has a wage stayed at $2.13, when you're looking at an industry that's majority female, you understand that basically the nation has valued these women at a $2 wage."

Despite federal law requiring restaurants to ensure tipped workers end up with the current federal minimum wage of $7.25 by making up the difference when tips fall short, violations are rampant. From 2010 to 2012, the U.S. Department of Labor found that of over 9,000 investigated restaurants, 84% violated wage and hour laws. The same report also found 1,200 tip credit violations.

In most European countries now, service charges are included in the bill and tipping isn't required or encouraged. But in the U.S., tipped workers continue to rely almost entirely on tips, and they are struggling. In 2014, one in six restaurant workers lived below the poverty line, which is 10 percentage points higher than the average in other industries, and more than 40% made less than the "twice-poverty" rate — double the official poverty line, which economists often consider the minimum needed to make ends meet.

"Essentially, what the restaurant industry has argued therefore for the last 150 years is, 'We shouldn't have to pay our workers. You, the customers, should pay our workers' wages for us,' which is not how it's done anywhere else in the world and not what tipping was intended to be," said Jamarayan.

Cassie Redman is a restaurant server living in Kokomo, Indiana, with two kids and husband who has a salaried job. Indiana is one of 15 states that allows restaurants to pay their employees the federal tipped minimum wage of $2.13.

"You know, a lot of people will have like thousands of dollars in their savings because that's their life savings. Our life savings right now is about $400 and that's if an emergency happens," she said. "If a car breaks down and we need to tow it and that tow is going to be $100. That way we're not dipping into rent or gas or phone bill."

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Cassie Redman relies on tips from her job waiting tables in Kokomo, Indiana. CBS News

Redman and her family have to rely on garage sales and assistance to help them get by.

"Nowadays it's like you have to have four incomes in one household to just, like, be comfortably living. Like having cars that run, not having to go to food banks, not having to wake up early in the morning so you can go sit in a food bank for three hours to get enough food to last you a week," she said. "It's pretty sad."

Tipping has become a deeply ingrained tradition in the U.S., and though it's often portrayed as a way to ensure good service for customers, there is actually little evidence it has any effect on the quality of service. In recent years, some restaurants have decided to move away from tipping and pay their staff a living wage. Seven states have also shifted the burden to the employer, requiring them to pay the regular federal minimum wage with tips as additional compensation. Jaramayan said there is no reason why we shouldn't see this happen across the board.

"These are the jobs that are here to stay, number one. Number two, thousands, millions of these workers take great pride in their work," she said. "They consider themselves professionals. They love service and hospitality. It is not impossible for a restaurant to value these women, these workers, as the professionals that they are."