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Think Tipping Is Out of Control? Watch This.TWO DOLLARS AND...

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Think Tipping Is Out of Control? Watch This.


That’s how much millions of American workers are paid under the federal subminimum wage — which was set all the way back in 1991.

While many think tipping for services has gotten out of control, arguing over who deserves a tip and how much they should get distracts from what we should really be angry about: business models that depend on not paying workers a living wage.

It’s bad enough that the federal minimum wage is a measly $7.25 an hour. But employers are allowed to pay tipped workers just $2.13 an hour because supposedly the workers will be able to make up for it in tips.

Saru Jayaraman of One Fair Wage has been advocating to change this absurd and exploitative law. I asked her to share with us FOUR big reasons why we need to get rid of the subminimum wage and pay service workers a full living wage with tips on top.

Number 1: Workers who earn a subminimum wage often end up making less than the minimum wage

43 states currently allow certain workers to be paid a subminimum wage. Employers in these states are legally required to make up the difference if a worker’s combined wage and tips don’t reach the full minimum wage. But over a third of tipped workers report that their bosses regularly fail to do this.

That’s because enforcement of wage laws is lax, and it makes it easier for employers to get away with shortchanging staff.

Number 2: The subminimum wage perpetuates gender discrimination and harassment on the job

More than two-thirds of tipped workers — 70% — in the U.S. are women. And one in six women that work a tipped job are living in poverty — that’s nearly 2.5 times the rate for workers overall.

Since workers earning the subminimum wage are so dependent on tips to make a living, they are put in situations where they have to tolerate inappropriate customer behavior. A staggering 76 percent — that’s more than three-quarters of tipped workers — have reported experiencing sexual harassment on the job. And that only got worse during the pandemic.

Number 3: Tipping is actually a relic of slavery

Tipped workers are disproportionately people of color. And Black service workers in particular consistently earn less, including tips, than their white counterparts for doing the same job.

Look, this inequity of the subminimum wage is tied to America’s history of structural racism.

Following the Civil War, tipping was used as a racist solution by employers who didn’t want to pay formerly enslaved Black workers. So by allowing them to pay their workers just in tips rather than a wage, employers were able to avoid directly paying these workers.

Number 4: Paying workers a living wage plus tips is actually better for business — and our economy.

Corporate lobbyists, particularly for the restaurant industry, warn that paying workers a full minimum wage with tips on top will be devastating to businesses. But research shows these fears are completely overblown.

So far, seven states have replaced their subminimum wage for tipped workers with a higher minimum wage that still allows for tips on top. These seven states are actually faring better than the 43 states with subminimum wages for tipped workers — both in the number of restaurants and number of people employed by restaurants. And take home pay for restaurant servers and bartenders in these states was 24% higher than in states with a wage of just $2.13 an hour.

Workers at restaurants that have scrapped their subminimum wages in favor of higher minimum wages with tips on top are more productive, happier, and less likely to quit their jobs. This alone helps business owners cut employee turnover nearly in half. This is especially important following the pandemic, when restaurants are facing historic staffing shortages because over 1 million workers have left the industry due to low pay.

So not only have higher wage states been able to maintain their industries, but workers are more productive, getting paid more, and less likely to live in poverty.  

And when workers have more money, they spend more money — stimulating their local economies in the process.

And for the first time in 30 years, workers are winning on this issue, like in DC and Chicago and a dozen other states.

The bottom line is that ending the subminimum wage for tipped workers is better for workers, it’s better for business, it’s better for our economy — and it’s the right thing to do.

Robert Reich

This is from Robert Reich’s blog, He is professor of public policy at Berkeley, former U.S. Secretary of Labor, and author of 13 books, the most recent of which is “Aftershock: The Next Economy and America’s Future.”


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