End the tipped-worker exception to the minimum wage

Photo of a waitress taking an order in a restaurant

Photo of a waitress taking an order in a restaurant Monkey Business Images/ Shutterstock

Earlier this month, Senate Majority Leader Chuck Schumer stepped into the shoes of a server for an hour at Hunky Dory restaurant in Brooklyn, drawing attention to the fight to eliminate the federal tipped minimum wage. He donned an apron and mask to do the dangerous and difficult work of taking customers’ orders while a deadly virus still circulates through the state.

When Schumer’s initial push for a federal minimum wage increase stalled out in the Senate – ruled by the parliamentarian as ineligible to pass through reconciliation, and impossible to pass over a Republican filibuster – it wasn't just the prospect of the $7.25 per hour federal minimum wage getting its first bump in12 years that went back into purgatory. 

The measure passed in the House of Representatives would also have addressed the lesser-known injustice endemic to American labor that Schumer was highlighting while slinging grilled cheese and celery soup: the persistence of an even lower minimum wage for tipped workers. 

For the 12 million Americans who work in jobs for which customers can offer tips for service, the federal minimum wage is just $2.13 an hour. While the law requires that any shortfall between their tips and the general minimum wage must be made up by the employer, wage theft is rampant. One study found that 17% of low-wage workers suffer wage theft in unmet tip credits, the plurality of whom work in food and drink service industries where the tipped minimum wage is in play. 

These workers – disproprotionately people of color, women, parents of children and people in poverty – may also be subjected to sexual harassment and discrimination in pursuit of tips. 

In writing on the tipped minimum in 2018, The New York Times editorial board noted that wage theft and harassment go hand-in-hand, as “bosses can easily withhold or steal tips, especially from workers they don’t like or who refuse their propositions.”

Though many New Yorkers like to think of the Empire State as a progressive pacesetter for the country, New York has its own, less egregious, form of this double standard. New York’s hourly minimum wage varies from $12.50 upstate to $15 in New York City, but the tipped-minimum counterparts are $8.35 and $10. The divergence means too many hard-working New Yorkers are still subject to the whims of customers, who are themselves suffering from COVID-19-induced financial stress, and they are reliant on employers to close the gap with complicated “tip credit” math.

New York state’s legislative session has just ended, but when lawmakers next assemble in Albany they should finally put tipped workers’ second-class wage citizenship in the past.

I first became aware of the odiousness of employees’ reliance on tips to make a living wage in 2008, when I had a conversation with a coffee shop barista about how her hourly cash tips had declined from about $5 to 50¢ as customers shifted from paying cash to swiping plastic. This barista and her peers hadn’t just been hammered by the financial crisis and resulting recession, they’d also suffered an invisible pay cut of over $4 an hour.

Baristas aren’t subject to the general minimum wage, but that conversation, and the broader hardship among tip earners that it signaled, inspired me to start DipJar – a tech company manufacturing tip jars and donation boxes designed to enable one-step credit and debit card generosity.

However, the barista and I couldn’t have foreseen a much bigger problem than the technological challenges of credit card tipping at the counter, which have since been largely addressed by the explosion of iPads used at point of sale, which strongly encourage tips on credit cards. 

The federal minimum wage was raised to $7.25 in 2009 – and then stayed there for a dozen years and counting, in spite of an unequal economic recovery and a pandemic that pushed unemployment to its highest rate since modern measurement began.

At the time I founded DipJar, I had a naive belief that individual customers, if supported by the right technological innovations, could put missing money back in the pockets of the baristas, valets, nail techs, and hotel housekeepers who took such good care of us. Now I know that bad policy means these service-workers – some of whom get the full minimum wage under New York law, while others are still subject to the two-tier system – are being left farther and farther behind.

COVID-19 has thrown this fact into further relief, highlighting the dangers and humiliations involved in earning tips. The New York women working in service jobs – who already earn just 71% of their male counterparts’ wages – found that the masks they’ve worn to protect their health impede their ability to earn tips, as they make it harder for customers to objectify them. They must choose between sacrtificing tips and showing their faces, which, in the words of advocacy organization One Fair Wage, makes “the sexual harassment already prevalent among tipped workers now life-threatening.”

These workers have also had to enforce health protocols, potentially antagonizing uncooperative customers and then relying on those same individuals to make ends meet. The Center for American Progress reports that “62 percent of all tipped workers and 76 percent of Black tipped workers said they were penalized by customers for trying to enforce social distancing and mask mandates.”

Covid-19 also demonstrated that the economic hardships that make service workers vulnerable are exacerbated, not corrected, by customers who also lose the ability to tip in hard times. As a survey by One Fair Wage found recently, “tips are down an estimated 50% to 75%, while public health researchers say that restaurant work is the single most deadly profession during the pandemic.” 

A single minimum wage would free low-wage workers from reliance on customer caprice—often tied up with harassment and discrimination, but also reflective of their own economic hardship—to ensure they make a living wage.

While one might think eliminating New York’s tipped minimum would put an unbearable burden on restaurants, bars, and other businesses, multiple studies have shown that employment does not suffer in states with one minimum wage. For example, an Economic Policy Institute study found that over almost 25 years, “the sector that comprises the bulk of tipped employment actually grew faster in states where tipped workers received the regular minimum wage than it did in states with a lower tipped minimum wage.” 

Indeed, as COVID-19 recedes, the biggest risk now facing employers is a crisis of labor supply. The One Fair Wage survey revealed that over “three-quarters of workers surveyed (76%) said they are leaving restaurants because of low wages and tips—by far the most important reason for leaving—and a slightly higher percentage (78%) said that the factor that would make them stay in restaurants is a ‘full, stable, livable wage.’” 

New York is coming back. With post-vaccination reopening, cash is flowing into industry once again. Still, our restaurants haven’t been exempt from this labor shortage, driven by substandard wages and low tips. 

Many owners – joined by conservatives, like a Federalist columnist bemoaning “brib(ing]” workers with “fatter paychecks” – are advocating strong-arming workers via slashed unemployment benefits or cuts to the social safety net instead. But even if market forces push restaurants to pay more, tipped workers will be starting from a deficit as long as the tipped minimum persists.

The last time New York legislators turned their attention to our minimum wage, Gov. Andrew Cuomo looped many of the workers DipJar was designed for into the regular minimum wage regime. Still, he left out 250,000 of lowest-paid workers, including the ones whose hardship Schumer tapped into during his time as a server.

As we wait for Congress to close the unfair, unproductive minimum wage gap nationwide, New York lawmakers should prioritize mandating a livable wage for all New Yorkers next session.

Ryder Kessler is a Democratic campaign operative and strategist. He is the founder of DipJar and served as its CEO from 2011 to 2017.