The Tipping Point: Millions Work for Less Than the Minimum Wage, but Tips Make Up the Difference for Many

By Brained, Jackson | State Legislatures, February 2018 | Go to article overview

The Tipping Point: Millions Work for Less Than the Minimum Wage, but Tips Make Up the Difference for Many


Brained, Jackson, State Legislatures


There's nothing minimum about the efforts to increase workers' wages over the last couple of years. There were 30 minimum wage increases through either legislation or ballot measures between 2013 and 2016. And last year, four state legislatures passed bills, although only Rhode Island's was signed by the governor.

Illinois Representative Will Guzzardi (D) supported the minimum wage increase "to get Illinois' economy moving again and that begins by putting money in workers' pockets," he said.

But the governor saw things differently, and vetoed the measure, as did the governors in Nevada and New Mexico to similar bills.

Opponents of wage hikes argue they kill jobs and force merchants to slash workers' hours, raise consumers' prices or both.

Thirty states now have higher hourly minimum wages than the federal government's, which remains at $7.25.

Not as Low as Others

The notion of a minimum wage can be misleading, however, because it is by no means the lowest a wage can go. Millions of workers in jobs not covered by federal and state wage and hour laws receive wages below the minimum.

Several state legislatures are turning their attention to three groups of these subminimum wage workers: those who also make tips, young people (including students and apprentices) and individuals whose earnings or productive capacity are impaired by a physical or mental disability.

The federal Fair Labor Standards Act of 1938 regulates employment wages. It sets the national minimum wage along with exemptions that allow certain groups to be paid less than the minimum. States may establish more protective standards than those set by the FLSA, and they can regulate the wages and hours of employees not subject to the federal act. Most states adopt the exemptions in the federal law; therefore, most recent state legislative action on this front has sought to limit exemptions.

Tipped Minimum Wages

The act was amended in 1966 to allow employers to use tip credits, meaning they can pay less than the minimum wage if the employee earns enough in tips to ave rage at least the federal wage of $7.25. This isn't easy to enforce, however.

Workers in occupations that receive tips are largely in the serv ice industry. They include waiters, bartenders, maitre d's, taxi drivers, hotel managers and maids, banquet workers, tattoo artists, casino managers and dealers, beauticians and manicurists, tour guides, sommeliers and more. There are roughly 3.3 million of these workers, and 60 percent of them are waiters and waitresses, according to the National Economic Council.

At least eight states have enacted legislation raising tipped wages in the last few years, but fewer have moved to eliminate the use of the credits. Maine residents tried to.

Voters approved a 2016 referendum raising servers' hourly wages from $3.75 to $12 by 2024 and eliminating the tip credit. But waiters didn't want it. They responded by campaigning to overturn the results. They said a higher wage would ca use customers to tip less and would actually reduce their take-home pay. The Legislature responded during the 2017 session by reversing the tipped wage hike and keeping the tip credit.

Maine Representative Joel Stetkis (R) supported the move to repeal the citizen initiative. He says that, although some argued the waiters were exaggerating the impact of eliminating the tip, "I choose to believe those who a re telling us that this new law, as we speak, is hurting their families."

Currently, seven states and Guam require employers to pay the full federal minimum wage of $7.25 before tips. Twenty-five states and Washington, D.C., require employers to pay tipped workers somewhere between the federal minimum cash wage, which has remained at $2.13 since 1996 and the state minimum wage. And, finally, 17 states, Puerto Rico and the Virgin Islands require only the federal minimum cash wage. …

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