What’s happening to the tipped minimum wage?

Some servers aren't ready for the minimum wage to be raised.
Some servers aren't ready for the minimum wage to be raised.
Joe Belanger/Shutterstock
Some servers aren't ready for the minimum wage to be raised.

What’s happening to the tipped minimum wage?

Advocates for the restaurant industry are trying to get New York to apply the standard minimum wage to tipped workers, but some servers aren’t quite ready for the system to change.
March 22, 2019

Gov. Andrew Cuomo may boast New York’s $15 minimum wage, but for some waitresses and servers – and most workers outside of New York City – that paycheck is still out of reach. While the New York City suburbs and the rest of the state are on track to reach a $15 minimum wage in a matter of years, some tipped workers across New York still aren’t making that much – at least not from their employers.

New York is one of 43 states with a two-tiered system for applying a minimum wage to workers. For professions in which tips are expected – though by no means guaranteed – employers can pay their workers less than the standard minimum wage, assuming that tips will make up for the deficit. In some cases, tips put workers’ take-home pay far over the minimum wage. In other cases, reliance on tips can be a struggle.

This “tipped” or “subminimum” wage has long been a topic of debate, but there may be a chance for New York to join states like California and Montana in abolishing the lower base wage for tipped workers. With renewed support in the state Legislature, momentum in Congress and cheerleaders including Amy Poehler and Sarah Jessica Parker, the movement to end a tipped minimum wage is gaining steam. Still, the proposal – which would apply a standard minimum wage to all workers – is running into some trouble in New York’s restaurant industry, which employs so many of the state’s tipped workers. Some servers aren’t quite ready for what would seem to be a raise, prompting City & State to break down both sides of the issue.

What is the tipped minimum wage?

Like the regular minimum wage, New York’s tipped minimum wage varies by location and by the size of the employer. Hospitality businesses in New York City with 11 or more employees can pay service employees $12.50 and food service workers $10 in cash wages, with the assumption being that another portion of their take-home pay will come through tips. By comparison, non-tipped employees in New York City are now required to make $15 an hour. In the rest of New York state – excluding Westchester County and Long Island – food service workers are paid $7.50 by their employer.

Even though seven states have banned the subminimum wage, this system is still the norm in the United States. The federal minimum wage for tipped workers is $2.13, compared to the standard federal minimum wage of $7.25.

The two-tiered system is a byproduct of slavery, argues Saru Jayaraman, president of Restaurant Opportunities Center United, a restaurant worker advocacy group. “The truth is that, in fact, subminimum wage is a legacy of slavery,” Jayaraman said. “It started at emancipation, when black workers were given a zero-dollar minimum wage and told to live off of this newfangled idea that had come from Europe called a tip.”

What’s the argument against it?

Critics say that the tipped minimum wage relies on the goodwill of others – something that was scarce during emancipation, and can be scarce today among disgruntled diners and customers. And while some of New Yorkers tipped workers include waiters and bartenders at high-end restaurants who might take home a couple hundred dollars a night on a 20 percent tip, that experience is not universal.

“Forty percent of tipped workers in New York state are single mothers,” said Jayaraman. “They're not really college students and actresses working for extra money. They're moms trying to feed their kids on the variability and fluctuating nature of tips. And when you're a single mom and you work at TGIF's or you work at Olive Garden or Denny's or IHOP, you're going to put up with whatever the customer does to you because that's who is paying your kids' meals, not your boss.”

The vulnerability of many tipped workers to sexual harassment and assault is largely what garnered the attention and platforms of celebrities like Amy Schumer and Michelle Williams. As the Time’s Up movement attempts to expand beyond Hollywood, however, some say their advocacy misses the mark.

Why are some in the restaurant industry in favor of keeping it?

The National Restaurant Association has come out against the idea, since it could increase the costs of restaurant owners.

Some tipped workers have criticized the movement to end the tipped wage – and the celebrities speaking out in favor of it – arguing that doing so would cause restaurants to raise prices and decrease demand, or lead restaurants to switch to a non-tipping model.

Samuel Estreicher, director of the Center for Labor and Employment Law at New York University School of Law, said that the tipped system works best in cities like New York. “A tipping system provides an incentive for employees to provide high-quality service in employment settings where employers cannot readily monitor quality,” Estreicher wrote in an email. “In NYC restaurants where the overall bill can be quite substantial, the customary 20% tip can yield considerably more income to the employee than a standard $15 minimum wage. Restaurants that have experimented with a standard wage have gone back to a tipping system.”

Still, Estreicher pointed out, that doesn’t mean that the system works everywhere. “Tipping works less well where overall bills are relatively low and tipping norms are not as strong, and where tips are not shared with other service personnel that do not directly deal with the customer,” he wrote.

Applying a standard minimum wage to tipped workers does not necessarily mean that customers will stop tipping. “When you eat out, do you ask the worker, 'How much do you make?' before you think about how much you're going to tip? That's not how people tip,” Jayaraman said, pointing to California as an example of where tipping has remained strong.

Where do lawmakers stand?

Assemblywoman Ellen Jaffee is sponsoring a bill this session that would do what many advocates are asking for – apply the standard New York minimum wage to food service and other tipped workers. State Sen. Jessica Ramos sponsors a companion bill in the Senate. The call for “One Fair Wage” has gained additional supporters, including state Sens. Alessandra Biaggi and John Liu and Assembly members Jo Anne Simon and Felix Ortiz.

What is the Cuomo administration doing?

Last spring, Cuomo called on the state Department of Labor and its commissioner, Roberta Reardon, to hold a series of hearings on the issue, which wrapped up in June. Advocates say that Cuomo and the Labor Department have been sitting on hours of testimony for nine months now, and that some action ought to be imminent.

Ultimately, however, the governor’s office says that the decision is out of his hands. "There is no greater champion for minimum wage workers in New York than Governor Cuomo,” Cuomo press secretary Caitlin Girouard said in a statement. “In 2015, under the Governor’s leadership, New York state raised the minimum wage for the first time for fast food and tipped wage workers, and in 2016 the Governor led the fight passing a $15 minimum wage in New York. Last year, the Governor directed the Department of Labor to review the possibility of ending minimum wage tip credits, which disproportionately affects women and people of color. The Department is the only regulatory agency legally permitted to review this issue and they are currently in the review process."

For her part, Reardon says more review is required. “Last year Governor Cuomo directed the Department of Labor to review the minimum wage tip credit,” Reardon said via an emailed statement. “Since then we have held numerous hearings throughout the State and collected thousands of comments, which we are currently reviewing. This issue affects multiple industries, thousands of workers, large and small businesses alike and every region of the state. We are reviewing all of the facts, the data, the testimony, the peer reviewed materials and the law to make sure that any final determination is factually and legally supportable in any and all applicable industries. We have a responsibility to make sure we do this correctly, not quickly without thorough review.”

Annie McDonough
Annie McDonough
is a tech and policy reporter at City & State.
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