Employees who earn significant tip income (e.g. waiters and waitresses) make over $13 an hour when their tips are included. Top earners bring in $24 an hour or more.
Tipped employees have two different sources of pay: Tip income, and a supplemental base wage. The supplemental base wage is set at $2.13 per hour at the federal level. When combined with their tip income, an employer must guarantee that a tipped employee will earn at least the federal minimum wage of $7.25 an hour. The data show they typically earn far more.
Union-backed advocacy groups are currently pushing lawmakers to raise the federal base wage for tipped employees. The Fair Minimum Wage Act of 2013 would raise it by 232 percent. University research shows that such a mandate would result in a significant reduction in hours and overall employment for tipped employees. The restaurants that employ tipped workers operate on thin profit margins (typically three percent), and the evidence shows they reduce or cut employee hours to offset an increase in labor costs.