Tips 101 – One Fair Wage for Everyone
The Raise the Wage Act would eliminate the subminimum tipped wage, which allows employers to pay workers who earn tips significantly less than the standard minimum wage.
In theory, if a worker doesn’t earn the minimum wage in tips, the employer is required to make up the difference. But when the Department of Labor conducted a compliance sweep of almost 9000 full service restaurants in 2010-2012, they found that almost 84% of restaurants had violated the sub-minimum wage system. Everyone who’s worked in the restaurant industry knows that the practice is extremely common.
Here’s the reality – the federal minimum wage for tipped workers is $2.13 an hour, a number so low that it’s often completely wiped out by taxes. This could mean tipped workers end up with $0 paychecks and a total reliance on tips, an extremely unpredictable source of income. It’s an unconscionable system that only exists because of inertia and the power of the restaurant lobby – it makes no sense to allow a major class of workers to be essentially exempt from major pieces of the social safety net.
It goes without saying this fiscal insecurity is debilitating for people trying to support themselves. These are people who go to work with merely a vague idea of how much money they will earn. They can work hard, and come away with next to nothing depending on how busy a shift is. The factors that determine if they do or don’t make enough to pay the bills are completely out of their control.
Bad weather keeping the restaurant empty? Tough luck.
A customer decides not to tip? That’s your problem.
The manager gives a lucrative shift to someone else? Maybe next time.
It’s no wonder that tipped workers, on average, face poverty (13% versus 6%) more than their counterparts. Instability and poverty don’t just affect the workers themselves. The spillover effects hurt their families, their landlords, and anyone who is trying to run a business in their neighborhoods. Financial insecurity, much like the coronavirus, is contagious.