Myth: Tips are better in states without a tip credit

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.”