Monthly Archives: December 2014

I’ve Got a Tip for You

Next time you order a BLT at your favorite restaurant, will you leave your server a tip?

Tipping is an issue fraught with questions. Who do I tip? Where do I tip? How much do I tip?

When it comes to tipping, lots of people are confused.

But the people on the fuzzy end of the lollipop–the ones who do the hard work–live in hope that the folks they serve will cough up a big tip.

People who work as servers in restaurants are particularly vulnerable. Thanks to a crazy federal minimum-wage provision, in some states employers can pay tipped workers only $2.13 an hour, the same rate allowed since 1991.

The result? Tipped workers are about twice as likely to be living in poverty as workers who don’t rely on tips. According to a recent study by the Economic Policy Institute, tipped workers have a poverty rate of about 13 percent, compared with a rate of 6.5 percent for other workers. The median wage for tipped workers—including tips—is $10.22, compared with $16.48 for workers overall.

Let’s look at how this result has come about.

Most of us favor a fair minimum wage for employees in our country. Witness the recent adoption of a higher minimum wage in such politically conservative states as Arkansas, Nebraska, and South Dakota, where referenda increasing the minimum wage passed in the 2014 midterm elections. And even though Republicans in Congress have stood in the way of enacting a higher federal minimum wage from $7.25 to $10.10 an hour, as proposed by President Obama, some state lawmakers have taken the initiative and increased the income of workers in their states by passing minimum-wage legislation of their own.

One group has been largely left out of this benevolent trend: Workers who depend on tips. According to articles in Mother Jones magazine in May 2014 and the Wall Street Journal in August 2014, only seven states, including California and Alaska, require employers to pay tipped workers the same minimum wage as nontipped workers.

The federal minimum wage for tipped workers has remained stagnant at $2.13 since 1991. If tipped workers aren’t earning the regular minimum wage (currently $7.25) via tips, employers are supposed to make up the difference. Are you surprised to learn that they don’t always do it?

President Obama’s proposed Minimum Wage Fairness Act would gradually raise tipped workers’ minimum wage to 70 percent of the regular minimum wage. That would help. But this increase has been opposed by the National Restaurant Association, which spent more than $2 million lobbying against it in 2013. (Some may remember that former Republican presidential candidate Herman Cain lobbied against any change during his tenure as president of the NRA.)

The NRA claims that no one is making only $2.13 an hour. But the “servers who make ‘good money’ are in the minority,” according to a spokeswoman for Restaurant Opportunities Center United, a group that tries to improve conditions for servers. She notes that servers are hit especially hard by the “wage theft” by restaurant owners who don’t make up the difference they’re supposed to. When the U.S. Department of Labor’s Wage and Hour Division investigated the restaurant industry from 2010 to 2012, it discovered that nearly 84 percent of restaurants had some kind of wage and hour violation.

Barbara Ehrenreich has documented the deplorable life of servers in her 2001 bestseller, Nickel and Dimed. Trying life at poverty-level wages, she spent her first month as a waitress, resulting in a “monthlong plunge into poverty” during which she often endured dehumanizing treatment at the hands of restaurant managers.

One problem is that servers are often unaware of the law requiring employers to make up the difference. One server states that unless tips were on credit card receipts, “We never logged our tips or reported them to our employers.” And when she told other servers what they were entitled to, “nobody felt comfortable asking employers about it.”

In the last few years, a new trend has appeared: a ban on tipping. A handful of restaurants in California, New York, and elsewhere have adopted a no-tipping policy, paying servers between $10 and $20 an hour in lieu of lower wages plus tips. How do these restaurants cover the cost of the higher wages they pay? Some, like Chez Panisse in Berkeley, California, add a service charge (like 15 or 20 percent) to their diners’ bills. Others are experimenting with higher menu prices. The San Francisco Chronicle noted in November 2014 that a new restaurant in that city plans to simply raise all prices on the menu by 15 percent.

As the Wall Street Journal has noted, servers in some upscale restaurants who currently earn “a handsome income” might not welcome losing out on tips. But the no-tipping trend is clearly underway. If adopted throughout the industry, it would likely benefit the vast majority of servers who right now are seriously underpaid, often living in poverty as a result. Doing away with tipping would require enormous change for most restaurants, however, so it may never become the standard policy in American restaurants.

In the meantime, next time you order that BLT, think about putting a generous wad of your own lettuce in the hands of your server. You just may be helping that server escape the grip of poverty.