Tips 102 – The Racist History of the Tipped Minimum Wage

Wage Basics

Tips 102 – The Racist History

When Congress debated the Fair Labor Standards Act, which created the first federal minimum wage, in the late 1930s, Southern Democrats refused to accept legislation that would put in place a wage floor for African Americans. Texas Representative Martin Dies succinctly stated his colleagues’ position as, “you cannot prescribe the same wages for the black man as the white man.” 

To ease these concerns, the bill that Congress eventually passed included exceptions for occupations with a significantly African American labor force, like agriculture and domestic labor. The legislation did not address tipped workers at all, which left the Supreme Court to later allow employers to count their workers’ tips as wages when determining whether they were paid the minimum wage.

Pre-Civil War Americans frowned on the practice of tipping, seeing it as an aristocratic practice that was fundamentally at odds with the American ideal of equality and democracy. In the wake of the Civil War, however, the practice grew in popularity as restaurant owners and rail operators discovered they could use it to employ newly freed African Americans without actually paying them any wages. The deeply-seated racial origins of the tipping system weren’t so well hidden in those days – it was widely and openly considered to be a system primarily for African Americans. One journalist in the early 20th century once wrote, “one expects… Negroes [to] take tips… it is a token of their inferiority. But to give money to a white man was embarrassing to me.” 

The legacy of this racist practice continues to hurt minority populations across America. Almost 40 percent of tipped workers are people of color, with women of color and immigrants in particular overrepresented among tipped workers. Among tipped workers, the poverty rate for people of color is higher than that of white people who work for tips – 17 percent versus 14 percent. Ending the separate treatment these workers receive from their employers and the government isn’t just an economic issue, it’s a racial justice issue as well.

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