Tipped wage in the United States

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The tipped wage is base wage paid to an employee that receives a substantial portion of their compensation from tips. According to a common labor law provision referred to as a “tip credit”, the employee must earn at least the state’s minimum wage when tips and wages are combined or the employer is required to increase the wage to fulfill that threshold. [1][2][3] This ensures that all tipped employees earn at least the minimum wage: significantly more than the tipped minimum wage.

Tipped minimum wage law[edit]

Federal law[edit]

The American federal government requires a wage of at least $2.13 per hour be paid to employees that receive at least $30 per month in tips.[4] If wages and tips do not equal the federal minimum wage of $7.25 per hour during any week, the employer is required to increase cash wages to compensate.[5] As of May 2012, the average hourly wage – including tips – for a restaurant employee in the United States that received tip income was $11.82.[6]

State law[edit]

Though the vast majority of employers are bound to the federal minimum wage, some states have chosen to increase the tipped minimum wage above the federal requirement. Seven states (and the territory of Guam) apply the same minimum wage to tipped and non-tipped employees. The other 42 states – including those without state minimum wage laws – have a lower minimum wage for tipped employees than for traditional employees, and require employers to make up for any wages that fall below the minimum wage.[7] Hawaii, which has the highest-paid waiters and waitresses in the country (mean wage: $17.84/hour)[8] has a minimum wage of $8.50 for tipped employees.

State Minimum Tipped Wage Notes
Alabama $2.13
Alaska $9.80 Same for tipped and non-tipped employees
Arizona $7.00 tipped wage plus tips must reach $10.00/hr
Arkansas $2.63 tipped wage plus tips must reach $8.50/hr
California $10.00 or $10.50 Same for tipped and non-tipped employees (26+ employees pays higher rate)
District of Columbia $2.77 tipped wage plus tips must reach $11.50/hr
Colorado $6.28 tipped wage plus tips must reach $9.30/hr
Connecticut $6.38 Bartenders’ minimum wage is $8.23/hour, tipped wage plus tips must reach $10.10/hr
Delaware $2.23 tipped wage plus tips must reach $8.25/hr
Florida $5.08 tipped wage plus tips must reach $8.10/hr
Georgia $2.13
Hawaii $8.50 tipped wage plus tips must reach $9.25/hr
Idaho $3.35
Illinois $4.95 tipped wage plus tips must reach $8.25/hr
Indiana $2.13
Iowa $4.35
Kansas $2.13
Kentucky $2.13
Louisiana $2.13
Maine $5.00 tipped wage plus tips must reach $9.00
Massachusetts $7.25
Maryland $3.63 tipped wage plus tips must reach $8.75/hr
Michigan $3.38 tipped wage plus tips must reach $8.90/hr
Minnesota $9.50 or $7.75 Same for tipped and non-tipped employees. Lower wage for employers making under $500,000 gross sales.
Mississippi $2.13
Missouri $3.85 tipped wage plus tips must reach $7.70/hr
Montana $8.15 or $4.00 Same for tipped and non-tipped employees. Lower wage for employers not covered by FLSA and earning less than $110,000 in gross sales.
Nebraska $2.13 tipped wage plus tips must reach $9.00/hr
Nevada $8.25 Same for tipped and non-tipped employees. Minimum wage is $7.25 when it is accompanied by health insurance benefits.
New Hampshire $3.26
New Jersey $2.13 tipped wage plus tips must reach $8.44/hr
New Mexico $2.13 tipped wage plus tips must reach $7.50/hr
New York $9.15 to $5.45 tipped wage varies widely by industry[9]
North Carolina $2.13
North Dakota $4.86
Ohio $4.08 tipped wage plus tips must reach $8.15/hr
Oklahoma $2.13
Oregon $9.75 Same for tipped and non-tipped employees
Pennsylvania $2.83
Rhode Island $3.89 tipped wage plus tips must reach $9.60/hr
South Carolina $2.13
South Dakota $4.325 tipped wage plus tips must reach $8.65/hr
Tennessee $2.13
Texas $2.13
Utah $2.13
Vermont $5.00 tipped wage plus tips must reach $10.00/hr
Virginia $2.13
Washington $11.00 Same for tipped and non-tipped employees
West Virginia $2.62 tipped wage plus tips must reach $8.75/hr
Wisconsin $2.33
Wyoming $2.13
Puerto Rico $2.13
US Virgin Islands $3.34 tipped wage plus tips must reach $8.35/hr

[10]

Debate over consequences[edit]

There is disagreement among economists, business leaders, and labor activists regarding whether the tipped wage should be higher and whether tipped employees should receive a different wage than non-tipped workers.

Proponents of a different wage for tipped and non-tipped workers point out that the law guarantees tipped employees the same minimum wage that other workers receive. They argue that because restaurants have very thin margins, an increase in the minimum wage could lead to higher prices for consumers and fewer jobs available for potential employees.[11] A 2011 study suggested that 2011’s WAGE Act, which would have raised the minimum wage for all tipped employees in The United States, would have led to a cumulative decrease in 11 million hours worked by tipped employees.[12] The same research found that each 10% increase in the cash wage paid to tipped employees tends to decrease hours worked by the affected employees by 5%. A 2012 study found that eliminating the tip credit tends to decrease employment in the U.S. restaurant industry.[13] Others express fear that eliminating the tip credit would result in fewer tips.[14] Some argue that eliminating the tip credit exacerbates income inequality by benefiting the more well-paid servers at the expense of the non-tipped back-of-the-house staff.[15]

In Massachusetts, where the tipped minimum wage is $2.63, the average income of tipped waiters and waitresses is $12.88. In Washington State, where the minimum wage for wait staff is $9.47, the average wage is $13.25 after gratuity. Of the five states where wait staff earn the highest average income per hour, four have a tipped minimum wage below the non-tipped minimum wage.[16] It is important to note, however, that these figures relate only to tips reported to the government for taxes, and that real tips may be significantly higher.

Opponents of the current minimum wage for tipped employees point out that the tipped minimum wage has remained stagnant since 1991 despite increases in the cost of living and in the standard minimum wage over that same time.[17] The minimum wage for tipped employees represented 50% of the standard minimum wage in 1968. By 2010, it was 29% of the non-tipped minimum wage.[18]

They also contend that, while employers are required to ensure that all employees receive the minimum wage after tips, the current system makes it possible for some employers to illegally coerce employees to over-report tips or dock their pay so that their final income is below the minimum wage.[19][20] Others argue that because tips often represent 50%-90% of a waiter’s income,[21] workers’ incomes are unfairly vulnerable to fluctuations in customers’ generosity.

See also[edit]

References[edit]

  1. ^ "Arkansas Department of Labor | Minimum Wage and Overtime". Labor.ar.gov. Retrieved September 7, 2013. 
  2. ^ "Tipped Employees: Payment of Less than Minimum Wage - The Maryland Guide to Wage Payment and Employment Standards - Employment Standards". Dllr.state.md.us. July 19, 2010. Retrieved September 7, 2013. 
  3. ^ https://web.archive.org/web/20130629080655/http://www.colorado.gov/cs/Satellite/CDLE-LaborLaws/CDLE/1248095305416. Archived from the original on June 29, 2013. Retrieved July 19, 2013.  Missing or empty |title= (help)
  4. ^ "What is the minimum wage for workers who receive tips?". Dol.gov. Retrieved September 7, 2013. 
  5. ^ "U.S. Department of Labor - Wage and Hour Division - U.S. Department of Labor-Handy Reference Guide to the Fair Labor Standards Act". www.dol.gov. Retrieved 2017-04-26. 
  6. ^ "Michael Saltsman: How to Put a Waitress Out of Work - WSJ.com". Online.wsj.com. May 31, 2012. Retrieved September 7, 2013. 
  7. ^ "U.S. Department of Labor - Wage & Hour Divisions (WHD) - Minimum Wages for Tipped Employees". Dol.gov. January 1, 2017. Retrieved May 10, 2017. 
  8. ^ "Waiters and Waitresses". Bls.gov. May 2016. Retrieved May 10, 2017. 
  9. ^ "Minimum Wage for Tipped Workers" (PDF). NY.gov. NY.gov. Retrieved 10 May 2017. 
  10. ^ "U.S. Department of Labor - Wage & Hour Divisions (WHD) - Minimum Wages for Tipped Employees". Dol.gov. January 1, 2017. Retrieved May 10, 2017. 
  11. ^ "Employer Mandate.com". Employer Mandate.com. Retrieved September 7, 2013. 
  12. ^ "Employment Policies Institute | Tip Credits and Employment in the U.S. Restaurant Industry". Epionline.org. November 14, 2011. Retrieved September 7, 2013. 
  13. ^ "Institute for the Study of Labor". IZA. July 9, 2013. Retrieved September 7, 2013. 
  14. ^ "Maryland restaurant execs, groups oppose minimum wage increase - Baltimore Business Journal". Bizjournals.com. March 19, 2013. Retrieved September 7, 2013. 
  15. ^ Heather Knight (March 28, 2009). "Restaurant owners renew call for tip credit". SFGate. Retrieved September 7, 2013. 
  16. ^ "Waiters and Waitresses". Bls.gov. March 29, 2013. Retrieved September 7, 2013. 
  17. ^ Smialek, Jeanna (April 25, 2013). "Waitresses Stuck at $2.13 Hourly Minimum for 22 Years". Businessweek. Retrieved September 7, 2013. 
  18. ^ Jamieson, Dave (June 2, 2012). "Minimum Wage For Restaurant Servers Remains Stagnant For 20 Years Under Industry Lobbying". Huffingtonpost.com. Retrieved September 7, 2013. 
  19. ^ Vielmetti, Bruce (April 2, 2013). "La Fuente hit with federal wage complaint". JSOnline. Retrieved September 7, 2013. 
  20. ^ "Waiters Sue Employer For Taking Wages To Cover Walk-Outs – Consumerist". Consumerist.com. April 5, 2013. Retrieved September 7, 2013. 
  21. ^ The Bureau of Labor Statistics, Occupational Outlook Handbook, 2004-05