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What is the tipped wage?
The tipped wage is the base wage for employees who earn tips (e.g. servers and bartenders). Tipped employees are legally guaranteed to earn at least the required minimum wage when tips are included. Most earn far more than that: Census Bureau data show that the average hourly wage for a restaurant employee earning tip income is nearly $14 an hour, with top earners bringing in $24 an hour or more.
Read a primer on the tipped minimum wage here, or review answers to common myths about the tipped wage below.
Fact: This claim is based entirely on a severely-flawed 2014 report from ROC. Data from the Equal Employment Opportunity Commission, which tracks restaurant industry sexual harassment by state, shows that the percentage of harassment claims originating from the restaurant industry is nearly-identical in states without a tip credit and those that follow the federal standard. In fact, a regression analysis that looked at all changes in the tipped wage over the past decade found a slight positive relationship between a higher tipped wage and the percentage of sexual harassment charges coming from restaurants. In other words, raising the tipped wage, if anything, may increase restaurant sexual harassment charges.
Fact: Tipped employees are overwhelming opposed to eliminating the tip credit. After a poorly-understood ROC-backed ballot measure to eliminate the tip credit passed in Maine, thousands of tipped employees organized to save it. They were successful in persuading a bipartisan group of legislators to support tip credit restoration. Currently in New York, an even-larger movement of tipped employees —a Facebook group has more than 20,000 members, while a change.org petition has more than 10,000 signers — has rallied in support of the state’s tip credit. And in the District of Columbia, a “massive majority” of the city’s restaurant servers and bartenders have rallied against a proposal to phase out the District’s tip credit.
Proponents of eliminating the tip credit have pointed to alternative no-tipping payment systems, such as the “gratuity-included” system popularized by New York restaurateur Danny Meyer. However, Meyer’s staff wasn’t nearly as supportive of this approach; Meyer admitted that he lost up to 40 percent of his staff after making this change. A survey of hundreds of restaurant employees found that 97 percent preferred a base wage and tips to a no-tipping alternative.
Fact: Analyzing past changes in the tipped minimum wage, the Census Bureau found that “tips per hour appear to decrease in response to higher tipped minimum wages.” Similarly, a Cornell University study also found states with higher tipped minimum wages see lower average tip percentages in restaurants.
One possible explanation, supported by a study published in the Southern Economic Journal, is that a higher tipped wage forces restaurants to cut back on staff, thus decreasing service and employees’ tip income. Other studies have noted that “raising the tipped minimum cash wage is a poorly targeted policy to deliver income to poor restaurant workers.”
Fact: Economists from Harvard Business School and Mathematica Policy Research, using data from Yelp, identified a 14 percent increase in Bay Area restaurant closures associated with each one-dollar increase in the base wage for tipped employees. The 14 percent increase in restaurant closures applied to median-rated restaurants (3.5 stars), but these aren’t just mediocre establishments; in Washington, DC, for instance, some of the District’s most-popular restaurants have 3.5-star ratings on Yelp. This is also reflected in San Francisco’s declining growth in full-service restaurant employment since 2012, which turned to job loss starting in 2017.
The anecdotes support this evidence; at the end of 2016, the Bay Area had so many restaurants closures that one food industry publication described it as a “death march. The San Francisco Chronicle, in a 2016 deep-dive on why restaurant prices were rising twice as fast as inflation, identified labor costs as “the biggest factor.” Emeryville, another California city with one of the highest minimum wages nationwide, conducted a study on its food service industry, and discovered many businesses that existed in 2015 (when the city’s now-annual minimum wage hikes were adopted) were no longer in business in 2019.
Fact: ROC has described eliminating the tip credit as the first step in “getting to no tips.” ROC founder Saru Jayaraman has variously said that “this system of tipping needs to go” and even authored an article in the New York Times titled “Why Tipping is Wrong.” More recently, a ROC spokeperson spoke critically of tipped employees who want to earn more and “[chase] the highest tips.”
Fact: The American custom of tipping was imported from western Europe, where providing a tip to workers in private homes was a common practice. University of Massachusetts-Amherst professor Gerald Friedman says tipping was not “particularly racial,” but rather “more a matter of customers showing off their wealth.” Friedman points to southern states that passed laws early in the 20th century which made it illegal to receive tips as further disputing the notion of any link between tipping and slavery. Tipped employees have rejected ROC’s claim as offensive and untrue.