Living Tip to Tip

Last fall and winter, as Covid-19 ravaged much of the country, 22-year-old Tizoc Zarate was waiting tables at a nice restaurant in Washington, D.C. Despite working long shifts, he often came home with only $30 in pay. He struggled to afford groceries for himself and his girlfriend.

That’s because Zarate relied heavily on tips to boost his small salary, and in the midst of the pandemic, many fewer people were eating out.

“It’s so hard to have your income depend on tips, because you have to sacrifice your own sanity some days,” Zarate says. “You have to put the customers’ needs and your manager’s needs before your own because you need that tip.”

There are about 4 million tipped workers in the U.S. That includes 2.5 million restaurant workers like Zarate, but also people in a variety of other jobs, such as manicurists, parking garage attendants, and bartenders.

We often hear about the debate over raising the $7.25 federal minimum wage and how Congress hasn’t increased it since 2009, which is the longest stretch since the minimum wage was established in 1938. But most Americans aren’t aware that there’s another, even lower minimum wage for tipped workers.

Last fall and winter, Covid-19 hit much of the country hard. At the time, 22-year-old Tizoc Zarate was waiting tables at a nice restaurant in Washington, D.C. He worked long shifts. But he often came home with only $30 in pay. He struggled to afford groceries for himself and his girlfriend.

That’s because Zarate relied on tips to boost his small salary. And fewer people were eating out during the pandemic.

“It’s so hard to have your income depend on tips, because you have to sacrifice your own sanity some days,” Zarate says. “You have to put the customers’ needs and your manager’s needs before your own because you need that tip.”

There are about 4 million tipped workers in the U.S. Among them are 2.5 million restaurant workers like Zarate. That also includes other workers, such as manicurists, parking garage attendants, and bartenders.

Congress hasn’t increased the $7.25 federal minimum wage since 2009. It’s been the longest stretch since the minimum wage was established in 1938. We often hear about the debate over raising the federal minimum wage. But most Americans aren’t aware that there’s another, even lower, minimum wage for tipped workers.

Sixteen states use the federal tipped minimum wage of $2.13 an hour (see map, below). Seven states have eliminated the tipped minimum wage entirely; in those states, tipped workers earn at least the same minimum wage as all other workers. In the remaining 27 states and in the District of Columbia, tipped workers earn a minimum wage that’s higher than $2.13 but still below the regular minimum wage in that state. (Thirty states and D.C. have set their regular minimum wages at a higher rate than the federal minimum.)

Tipping in the U.S. has its roots in the post-Civil War period. It began in the late 19th century, many historians say, as a way for White business owners to get around having to pay salaries to Black workers who had previously been enslaved.

Later, when the minimum wage was created in 1938, it didn’t apply to many jobs that, at the time, chiefly employed Black people, including field workers, servers, and domestic workers.* The tipped minimum wage—sometimes called the subminimum wage—was established in 1967, after Black lawmakers, who saw it as a racial justice issue, led a fight to secure some wage protection for Black workers.

It was set at half the regular minimum wage, and for decades, every time the minimum wage was increased, the tipped minimum went up along with it. Then, in 1996, amid lobbying from the restaurant industry, Congress changed the law so that the tipped minimum wage didn’t automatically increase alongside the regular minimum wage. The result is that the tipped minimum wage has remained at $2.13 since 1991 (see “How Minimum Wages Have Increased,” below).

In theory, tips are supposed to make up the difference between these lower hourly wages and the regular minimum wage. And technically, federal law requires employers to pay the difference if a worker doesn’t earn enough in tips to meet that threshold.

Sixteen states use the federal tipped minimum wage of $2.13 an hour (see map, below). Seven states have done away with the tipped minimum wage altogether. In those states, tipped workers earn at least the same minimum wage as all other workers. In the remaining 27 states and in the District of Columbia, tipped workers earn a minimum wage that’s higher than $2.13 but below the regular minimum wage in those areas. (Thirty states and D.C. have set their regular minimum wages at a higher rate than the federal minimum.)

Tipping in the U.S. has its roots in the post-Civil War period. Many historians say that it began as a way for White business owners to avoid paying salaries to Black workers who had previously been enslaved.

The minimum wage was created in 1938. At the time, it didn’t apply to many jobs that mainly employed Black people, including field workers, servers, and domestic workers. The tipped minimum wage is sometimes called the subminimum wage. It was established in 1967, as a result of the efforts of Black lawmakers, who saw it as a racial justice issue. They led a fight to secure some wage protection for Black workers.

It was set at half the regular minimum wage. For decades, every time the minimum wage was increased, the tipped minimum went up along with it. Then, things changed in 1996 due to lobbying from the restaurant industry. Congress revised the law so that the tipped minimum wage didn’t automatically increase with the regular minimum wage. The result is that the tipped minimum wage has remained at $2.13 since 1991 (see graph, below).

In theory, tips are supposed to make up the difference between these lower hourly wages and the regular minimum wage. And technically, federal law requires employers to pay the difference if a worker doesn’t earn enough in tips to meet that threshold.

But a recent investigation by the U.S. Department of Labor found that often doesn’t happen: Out of 9,000 restaurants, investigators found more than 1,100 violations adding up to $5.5 million in lost earnings for those workers.

Workers’ advocates say when a huge chunk of an employee’s income is dependent on tips, it creates massive uncertainty.

“It’s hard to budget for the month because you don’t know if the manager’s going to get mad at you and cut your shifts, or the weather is bad and not as many customers come,” says Diana Ramirez of the National Women’s Law Center. And the fact that there’s no record of a large chunk of their earnings makes it hard for workers to get a car loan or a mortgage. It also makes it hard for them to prove they earn enough money to qualify for unemployment insurance if they lose their jobs.

But a recent investigation by the U.S. Department of Labor found that often doesn’t happen. Out of 9,000 restaurants, investigators found more than 1,100 violations. These violations added up to $5.5 million in lost earnings for those workers.

Workers’ advocates say that the tipped minimum wage creates massive uncertainty for workers. That’s because a huge chunk of their income is dependent on tips.

“It’s hard to budget for the month because you don’t know if the manager’s going to get mad at you and cut your shifts, or the weather is bad and not as many customers come,” says Diana Ramirez of the National Women’s Law Center. And there’s no record of a large chunk of their earnings. That makes it hard for workers to get a car loan or a mortgage. It also makes it hard for them to prove they earn enough money to qualify for unemployment insurance if they lose their jobs.

The pandemic created new problems for tipped restaurant workers, many of them young people, and sometimes those new problems exacerbated existing ones, like harassment by customers.

Shelly Ortiz, 25, who worked at a ramen noodle and cocktail restaurant in Phoenix, Arizona, describes customers who demanded last summer that she pull her face mask down so they could see her face and decide how much to tip her.

“I’m risking my life so you can have a margarita right now, and the harassment was unbearable,” she recalls.

Many restaurant servers—especially the women—say that during the pandemic, customers frequently asked them to take their masks off. They say it made them worry about their health and also question their sense of self-worth in debating whether to placate the customer.

“You have a 10-second talk with yourself like, ‘This tab is pretty big, how badly do I want this tip?’” says Francesca Palmisano, 22, a server at a Phoenix restaurant. She adds, “It makes you question your integrity.”

Yamila Ruiz of One Fair Wage, a group pushing to eliminate the tipped minimum wage, says restaurant workers were put in the position of having to police their customers as if they were public health marshals.

“But at the same time,” she says, “they rely on those same people for tips. As a result, their wages suffered.”

The pandemic has also highlighted the inherent public health problem created by forcing workers to rely on tips.

“Pre-pandemic, I can’t count how many times I’ve gone to work sick,” says Hayden Smith, a server at an upscale restaurant in Nashville, Tennessee. “You don’t have the opportunity to work from home. If you miss your Saturday shift, you’re not guaranteed to make that money on a Tuesday.”

Many advocacy groups are calling for the elimination of the tipped minimum wage. They say tipped workers should earn the same minimum wage as other workers, plus whatever tips customers choose to give them.

Ramirez sees the elimination of the tipped minimum wage as a gender equity issue because 70 percent of today’s tipped workers are women.

“Women are forced to tolerate unwelcome and inappropriate behavior from customers because they’re dependent on those tips,” she says.

The pandemic created new problems for tipped restaurant workers. Sometimes those new problems worsened existing ones, like harassment by customers. Many of the workers who’ve had to endure these conditions are young people.

Shelly Ortiz, 25, worked at a ramen noodle and cocktail restaurant in Phoenix, Arizona. She says that last summer customers demanded that she pull her face mask down so they could see her face and decide how much to tip her.

“I’m risking my life so you can have a margarita right now, and the harassment was unbearable,” she recalls.

Many restaurant servers—especially the women—say that during the pandemic, customers frequently asked them to take their masks off. They say it made them worry about their health. Debating whether to honor the request from customers also made them question their self-worth.

“You have a 10-second talk with yourself like, ‘This tab is pretty big, how badly do I want this tip?’” says Francesca Palmisano, 22, a server at a Phoenix restaurant. She adds, “It makes you question your integrity.”

Yamila Ruiz of One Fair Wage, a group pushing to eliminate the tipped minimum wage, says restaurant workers were put in the position of having to police their customers as if they were public health marshals.

“But at the same time,” she says, “they rely on those same people for tips. As a result, their wages suffered.”

The pandemic has also highlighted the public health problem created by forcing workers to rely on tips.

“Pre-pandemic, I can’t count how many times I’ve gone to work sick,” says Hayden Smith, a server at an upscale restaurant in Nashville, Tennessee. “You don’t have the opportunity to work from home. If you miss your Saturday shift, you’re not guaranteed to make that money on a Tuesday.”

Many advocacy groups are calling for the elimination of the tipped minimum wage. They say tipped workers should earn the same minimum wage as other workers, plus whatever tips customers choose to give them.

Seventy percent of today’s tipped workers are women. That’s why Ramirez sees the elimination of the tipped minimum wage as a gender equity issue.

“Women are forced to tolerate unwelcome and inappropriate behavior from customers because they’re dependent on those tips,” she says.

The Raise the Wage Act, which is pending in Congress, would gradually raise the federal minimum wage to $15 an hour and would also eliminate the tipped minimum wage. President Biden supports this bill, but so far it remains stalled in Congress.

The restaurant industry opposes the elimination of the tipped minimum wage at this time, saying it’s unfair to force restaurants to pay higher wages while they’ve been struggling to survive amid the pandemic. In a recent survey of 2,000 restaurants conducted by the National Restaurant Association, 84 percent of restaurants said they’d have to cut jobs or employee hours if the tipped minimum wage were eliminated.

Rachel Greszler, an economist at the Heritage Foundation in Washington, D.C., says eliminating the tipped minimum wage is unnecessary because most workers earn more than minimum wage in tips. She adds that this shift would have disastrous effects on restaurants.

The Raise the Wage Act would gradually raise the federal minimum wage to $15 an hour. It would also eliminate the tipped minimum wage. President Biden supports this bill, but so far it remains stalled in Congress.

The restaurant industry opposes the elimination of the tipped minimum wage at this time. Industry leaders say it’s unfair to force restaurants to pay higher wages while they’ve been struggling to survive amid the pandemic. In a recent survey of 2,000 restaurants conducted by the National Restaurant Association, 84 percent of restaurants said they’d have to cut jobs or employee hours if the tipped minimum wage were eliminated.

Rachel Greszler, an economist at the Heritage Foundation in Washington, D.C., says eliminating the tipped minimum wage is unnecessary. That’s because most workers earn more than minimum wage in tips. She adds that this shift would have disastrous effects on restaurants.

“We’re coming out of the pandemic and restaurants were one of the hardest-hit industries, so this would be the worst time to impose that huge wage hike on them,” she says.

The U.S. is the only country in the world where tips make up a majority of pay to restaurant workers.

“Plenty of studies show that tips don’t go away when you eliminate the tipped minimum wage,” says Lily Roberts of the Center for American Progress, a Washington, D.C.-based think tank. “In fact, most customers don’t know that the server makes less than minimum wage.”

Tizoc Zarate and Shelly Ortiz have left restaurant work. The stress of it during the pandemic became too much. But Hayden Smith is still waiting tables. He hopes the spotlight the pandemic has shone on this issue leads to real change for workers like him.

“It kind of woke people up in our industry to a different standard of pay and ways to be treated,” Smith says. “And I think that’s why you see the worker shortage. It’s a refusal to work for this ridiculous wage that we used to think was normal. It really just showed us how poorly we had been treated before, and we now have an opportunity to ask for better.”

“We’re coming out of the pandemic and restaurants were one of the hardest-hit industries, so this would be the worst time to impose that huge wage hike on them,” she says.

The U.S. is the only country in the world where tips make up a majority of pay to restaurant workers.

“Plenty of studies show that tips don’t go away when you eliminate the tipped minimum wage,” says Lily Roberts of the Center for American Progress, a Washington, D.C.-based think tank. “In fact, most customers don’t know that the server makes less than minimum wage.”

Tizoc Zarate and Shelly Ortiz have left restaurant work. The stress of it during the pandemic became too much. But Hayden Smith is still waiting tables. He hopes the spotlight the pandemic has shone on this issue leads to real change for workers like him.

“It kind of woke people up in our industry to a different standard of pay and ways to be treated,” Smith says. “And I think that’s why you see the worker shortage. It’s a refusal to work for this ridiculous wage that we used to think was normal. It really just showed us how poorly we had been treated before, and we now have an opportunity to ask for better.”