Five states are currently deliberating whether to abolish the practice of paying tipped workers less than the minimum wage. In addition to these states, activists are pushing for similar changes in many others, emphasizing the significance of this issue in an election year.
Closing the Wage Gap
Michigan, Arizona, Ohio, Massachusetts, and Connecticut are among the states considering ballot measures or reintroducing bills to eliminate the two-tiered pay system that currently exists for tipped workers such as restaurant servers and bartenders. These workers earn a lower “subminimum” wage compared to their non-tipped counterparts.
Currently, only seven states pay a single minimum wage regardless of tips. While several other states have raised subminimum pay for tipped workers above the federal minimum of $2.13 per hour, these workers still earn less than the state’s minimum wage in terms of base pay.
Wage Discrepancies
Although employers are obligated to make up the difference when tips fall short of the federal minimum wage of $7.25 per hour, labor advocates and researchers argue that this rarely happens consistently.
New York is one of the next battlegrounds in this fight. While a $15 hourly minimum wage has already been implemented in the state, tip earners are exempt. Activists and progressive lawmakers are urging Democratic Governor Kathy Hochul to back a single pay floor for all workers as part of the 2024 budget plan.
Momentum for Change
The fight to eliminate subminimum wages gained significant momentum when Chicago lawmakers voted to gradually phase out the tipped subminimum wage over five years. Similarly, Washington, D.C., took a similar step through a successful ballot measure. Organizations like One Fair Wage, a national advocacy group, have witnessed thousands of restaurants voluntarily abandoning subminimum wages in favor of a unified pay structure for all workers, supplemented by tips.
Apart from New York and Connecticut, One Fair Wage is campaigning for legislation to end subminimum pay in Illinois, Maryland, Hawaii, and Rhode Island in 2024. In total, the group reports that 13 states are considering similar policy changes this year.
Shifting Restaurant Industry Landscape
The COVID-19 pandemic caused significant shifts in the restaurant industry. As the economy reopened and employers struggled to hire workers, tipping became less reliable as a source of income for subminimum wage earners. According to Saru Jayaraman, president of One Fair Wage, a substantial number of restaurants across Chicago had already raised wages to the point where the city’s ordinance was redundant.
While tipping volumes have modestly increased since the pandemic, frustrations over tipping etiquette, exacerbated by the prevalence of digital card readers, have led to customer fatigue.
Considerations and Opposition
Opponents of eliminating subminimum wages argue that it is essential for smaller establishments operating on narrow profit margins. They claim that higher labor costs would force businesses to increase menu prices or introduce service charges. Additionally, some argue that tipping remains the best way to encourage good service.
Sylvia Allegretto, a senior economist at the Center for Economic and Policy Research, expressed skepticism about arguments against higher wages, stating that restaurants can thrive even with a higher minimum wage.
Jayaraman acknowledged concerns about competition but argued that implementing a unified pay structure is necessary to address the hiring crunch and high turnover rates in the industry. She believes that many workers are unwilling to return to work until it becomes a legal requirement.
One Fair Wage not only aims to eliminate subminimum pay for tipped workers but also advocates for higher pay standards overall. In addition to the states mentioned, One Fair Wage supports ballot measures in Michigan, Arizona, Ohio, and California that would raise the overall minimum wage for all workers.
The next year will reveal how many voters and policymakers support these changes.
Read more from F5 Magazine.