Rethinking Wages for Tipped Workers

It’s the standard practice for restaurant dining in America: You order. You eat. You pay. And you tip.

More than 4 million American workers rely on tips to make a living, and more than 60 percent of them are employed in the foodservice industry usually as servers or bartenders.

In most states, tipped workers –employees who receive at least $30 per month in tips–earn a base pay significantly lower than the minimum wage. At the federal level, minimum wage for tipped workers is $2.13 an hour, which hasn’t increased in 25 years.

The rationale is that tipped workers will make at least minimum wage through the tips left by their customers.

Shannon Sorenson, a waitress in Wisconsin, said the instability of tips makes it difficult for her to plan financially.

“There are some days the tips are amazing,” she told PBS NewsHour Weekend. “There’s days that, you know, I’m making probably compared to someone with a four-year degree. But then there’s other days that I’m making nothing. It’s so tough.”

When tips aren’t enough to make minimum wages, employers are supposed to make up the difference. But, according to the Department of Labor, there were at least 1,500 cases of tip credit violations in the past three years.

Some states like Minnesota, have eliminated the separate wage structure and now require employers to pay tipped workers the full minimum wage as base pay, regardless of tips. That means more money for tipped workers’ bottom line.

“What we see in those states is that the poverty rate among tipped workers is dramatically lower than in the states where they’re getting $2.13 per hour as their base wage,” David Cooper of the Economic Policy Institute said.

“What that tells us is that, even though, in theory, these folks in the other states are supposed to be getting at least the normal minimum wage, something isn’t adding up.”

But restaurant employers in Minnesota say that paying tipped workers more has made the cost of running a restaurant unmanageable. It has also increased the wage disparity between the serving staff and the kitchen staff, who don’t earn tips.

The move has prompted some restaurants to address the wage issue in another way: by paying servers a higher hourly rate, but eliminating tipping altogether from their restaurants.