Workers Who Get Tips Are Closing in on a Massive Raise

Oh, and less wage theft by greedy bosses—but only if the restaurant lobby can be beaten.
February 27, 2019, 5:00am
Being a waiter might not be as much of a mess from a pay standpoint starting soon.
Photo by Jeff Kubina via Flickr/Wikimedia Commons. Social photo of Alexandria Ocasio-Cortez by Alex Wong/Getty Images

Politicians across America are getting serious about fighting for tipped workers in 2019. But they still face an uphill battle.

So far this year, lawmakers in at least ten states—Connecticut, Illinois, Indiana, Maryland, Massachusetts, Mississippi, New Mexico, New York, Pennsylvania, and Rhode Island—have broached bills to eliminate the tipped minimum wage either immediately or through incremental raises until it matches the full minimum. Versions of several of those measures still appeared to be alive as of this month.

Eva Putzova, director of communications for the worker-advocacy group Restaurant Opportunities Centers United, said she expected more states to introduce bills in the coming weeks. Virginia and New Jersey also at least briefly considered bills to raise the tipped wage, albeit not eliminate it.

At the federal level, the Raise the Wage Act would bring the national minimum wage up to $15 an hour and eliminate, over time, the tipped minimum wage—currently set at $2.13. With 198 co-sponsors, the bill had a good shot at passing the Democratic-controlled House and becoming the first measure of its kind to clear a chamber of Congress since the adoption of the Fair Labor Standards Act in 1938. Republican control of the Senate and White House obviously made its passage into law extremely unlikely, at least until 2021.

Still, ROC United’s One Fair Wage campaign has appeared to gain momentum as other high-profile, progressive policies—and left-wing figures like Alexandria Ocasio-Cortez, herself a former bartender who backs the Raise the Wage Act—have become more mainstream. Activist, author, and founder of ROC United Saru Jayaraman also credited the surge in OFW’s popularity in part to the #MeToo movement, which highlighted how vulnerable service-industry workers are to sexual harassment, and demonstrated the power disparity created when workers have to rely on the whim of customers to make their money.

For Jayaraman, the pun was almost unavoidable: The campaign has reached a “tipping point.”

“We’ve seen a sea change,” she added. “The movement in the House is huge, and the beginning of many more states and then finally federal moving this in the next few years.”

But activists know these bills often face strong opposition from the restaurant lobby. Multiple voter-approved ballot measures to end the two-waged system have been reversed by local legislatures afterwards, and language changing the tip-credit is often the first to go in battles over minimum-wage bills.

In Washington, DC, voters passed Initiative 77 last year with 55 percent support. The law would have gradually eliminated the tipped minimum wage by raising it incrementally over a couple years until it matched the regular minimum. But the city council repealed it in October. Diana Ramirez, who led the “yes” campaign for ROC United in DC, called the council’s move undemocratic.

“Regardless of how folks felt about Initiative 77, it passed,” she said. “You have to respect the will of the voters.”

Restaurant industry lobbyists, meanwhile, celebrated the repeal, and maintain their position: that the tipping system as it exists now works best for both ownership and workers.

After all, they tend to argue, if a tipped worker doesn’t make enough in tips to reach the regular minimum wage in a pay period, employers are required to make up the difference. But this is often where tipped workers get screwed by a form of wage theft, critics note. Individuals have little recourse if an employer doesn’t properly keep record of hours and wages, or if they simply refuse to pay—in some cases telling the worker, essentially, "If you don’t like it, you can quit."

“Any employer who does not make up the difference is violating the law and should be punished,” Mike Whatley, vice president of state and local affairs with the National Restaurant Association, said in an e-mail. The Association is a trade organization that represents restaurants. “While such bad behavior is rare, we support efforts to ensure that the law is being enforced to protect tipped employees.”

Supporters of One Fair Wage note that wage theft is hardly “rare.”

A 2017 analysis of data in the ten largest states in the US by the left-leaning Economic Policy Institute found 17 percent of eligible workers experienced minimum violations, accounting for $8 billion in lost income annually—the report projected losses of $15 billion nationwide. In Pennsylvania and Texas, the worst offenders, according to the analysis, the average cheated worker lost an estimated 30 percent of owed wages. A US Labor Department study of 9,000 restaurants cited by ROC United, the advocacy group, found over 80 percent had committed wage and hour violations. Another survey of restaurant workers in New York City earlier this decade also found 80 percent experienced wage theft.

The threat of taking home less than a living wage leaves tipped workers at the whims of fickle—or worse—customers. Research shows how much workers get tipped has little to do with quality of service and more to do with a customer’s mood, which is often affected by things like the race and gender of the worker.

Women—who make up a majority of tipped workers in the country and upwards of 70 percent in the restaurant industry—are also more likely to be subject to sexual harassment when working a tipped job. For some foreign-born workers, advocates added, not speaking English can leave them uniquely vulnerable, with undocumented workers sometimes disinclined to file complaints against employers so as to avoid attention from law enforcement.

The National Restaurant Association, which opponents often refer to as “the other NRA,” has argued that while these are valid concerns, trainings and better enforcement can address such issues. Meanwhile, raising the wage puts the onus on restaurants that may have to cut hours or jobs, or else go out of business, the industry has claimed.

While there are cases where restaurants cut workers’ shifts to account for the added expenses in places where wages went up, ROC United countered by noting “the sky isn’t falling” in the seven states that don’t have a tipped wage, like California and Oregon. In fact, EPI concluded tipped workers in states with one uniform minimum wage had a median income that was “significantly higher” than those in states with two tiers of minimum wages.

As Seattle moved to raise its minimum wage to $15 an hour and increased the tipped wage (albeit not to the same level), Jake Vigdor, a professor of public policy at the University of Washington, said workers were concerned they’d end up making less as restaurants ended the practice of tipping. While some businesses did go that way, Vigdor said, it was “far from universal,” and having a higher base wage has tradeoffs—your money is less vulnerable to wage theft, but it’s guaranteed to be taxed.

Sylvia Allegretto is a labor economist and co-chair of the Center on Wage and Employment Dynamics at UC Berkeley. She’s studied the economic impact of raising the minimum wage and said while we’ve never seen a jump like $2.13 to $15 an hour, the added costs to businesses can be offset by savings in turnover as workers are more likely to stay in a better-paying job. She’s also found tipping hasn’t stopped in the states without two tiers of wages and felt ultimately having one wage best protected workers.

“The two-tiered system makes it easy for businesses to cheat, to cheat workers,” Allegretto said. “It’s just an odd system that has benefited the restaurant industry.”

Restaurant workers aren’t the only ones who rely on tipped wages: nail salon employees, car washers, bell hops, and others work for a tipped wage and are similarly privy to wage theft.

A 2015 New York Times investigation found nail salons in New York City were notorious for shorting their workers. Of the 100 or so workers interviewed by the paper, only a quarter said they regularly brought home the equivalent of the state minimum wage, and nearly all of them had experienced theft at least once.

“The system is complicated … At the end of the week, one wouldn’t exactly know how much you actually should be getting paid,” Glenda Sefla, who worked in a New York City salon for six years before becoming an organizer with the local Nail Salon Worker Association, said in an interview. “When it is brought up, ‘We didn’t make enough in tips,’ a typical response is, ‘If you don’t like it, if you’re not happy here, you can leave.’”

More than anything, working for a full, uniform minimum wage would mean peace of mind and stability, Sefla argued. Salons have far fewer customers in the winter, she added, and during the summer a living wage can be dependent on how many generous customers come in.

“We’re not asking for anything but what is the minimum,” she said. “This doesn’t just affect us economically, this affects our health—our mental, physical, and emotional wellbeing—if we’re able to work and be assured that we’re getting paid a fair wage.”

Eliminating the tip credit became more urgent when the Department of Labor recently moved to end the “80/20 rule.” This Obama-era regulation required employers to keep tipped workers on duties that generated tips for about 80 percent of their work hours—limiting time spent on things like folding napkins or restocking silverware. While this rule often went unenforced, losing it only adds to tipped workers’ already precarious situation.

“We’re seeing some of the real economic affects of low wages, low family income, higher poverty rates associated with the lower tipped credit,” Allegretto said in arguing for a single-wage system. “In the long-run, that’s what we should do. We need a better-paying, better-quality job overall.”

Correction 02/27/2019: A previous version of this story misattributed a written response from the National Restaurant Association to a vice president of communications rather than the vice president of state and local affairs. We regret the error.

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