Editor’s Note: For an alternative viewpoint, please see: Point: The Misunderstood Economics of Tipping Abolition
There are restaurants in every country across the globe, and customers tip in many countries, though not all. However, the United States is the only country on Earth where waiters, waitresses, bartenders and other service-sector workers must rely on the generosity of customers’ tips to pay the bulk of their salaries.
As a consequence of America’s unique tipping system, tipped workers in the United States experience poverty at twice the rate of non-tipped workers. That’s a problem, and it needs to change.
It’s important to first understand how tipped workers are paid. In most states, workers who regularly receive tips can be paid a base wage well below minimum wage — as little as $2.13 per hour under federal law — so long as the sum of that base wage plus their weekly tips averages out to at least the regular minimum wage. This means that even when a waitress does well in tips on a Friday or Saturday night, a slow Monday or Tuesday shift can effectively cut her weekly pay to just minimum wage. And because tips can vary dramatically each shift — depending on everything from the server’s appearance to the weather — weekly income for tipped workers can be highly unstable.
If this seems like a minor inconvenience, imagine how hard it would be to budget, or to consider a car loan, a mortgage or college tuition if you didn’t know what your income would be each week.
Of course, tipped workers should be able to depend on earning at least the minimum wage, but in reality, they often cannot. Restaurants are supposed to “top off” tipped workers’ paychecks when their tips do not bring them up to the minimum wage, but this requirement is difficult to enforce, and violations are frequent.
In investigations of more than 9,000 restaurants, the U.S. Department of Labor found that 84 percent were in violation of wage and hour laws, including nearly 1,200 violations of the requirement to bring tipped workers’ wages up to the minimum wage. At the restaurants investigated, tipped workers were cheated out of nearly $5.5 million.
We need to do a better job enforcing the law, but this will take greater resources and tougher laws — more investigators, regular compliance checks and stricter penalties for violations.
A simpler solution is to just get rid of the lower minimum wage for tipped workers and require employers to pay the regular minimum wage for all hours worked, regardless of tips. Already, eight states have adopted this approach, and the results are dramatic: Restaurant servers and bartenders in these states earn 20 percent more per hour than their counterparts in states where restaurants can pay them $2.13 per hour.
The poverty rate among waiters, waitresses, and bartenders in these “equal treatment” states is 7.8 percentage points lower than in the $2.13 states.
What might surprise some is that the restaurant industry actually does better when tipped staff can rely on a steady paycheck. According to the Quarterly Census of Employment and Wages, full-service restaurants in the eight states where tipped workers get the regular minimum wage before tips saw stronger growth from 2011 to 2014, both in terms of number of establishments and number of jobs, compared to states with a separate, lower minimum wage for tipped workers.
But is this enough? Doing away with the separate lower minimum wage for tipped workers is a good start, but there’s ample evidence that we should abandon the practice of tipping altogether. Research has consistently shown that tipping is often discriminatory, with white servers receiving larger tips than black servers for the same reported quality of service. Second, restaurant worker advocacy groups argue that tipping creates a toxic environment, where sexual harassment is common, as tipped workers must tolerate inappropriate treatment from unruly customers lest they endanger their pay.
There is no reason U.S. restaurants couldn’t build their labor costs into menu prices and pay all their workers a regular salary. In fact, some prominent restaurants have moved to a salaried model, finding that it encourages staff unity, better service and that many customers prefer it.
Ultimately, it may be difficult to completely eliminate such a deeply ingrained cultural norm. That’s okay. We don’t need to prohibit customers from rewarding good service with a tip, but no worker should have to rely on the whims of customers to determine whether they’ll be able to make ends meet.
