While the federal minimum wage is $7.25 an hour, workers who earn tips — waiters, bartenders, taxi drivers, and others — only have to be paid $2.13 an hour. And while the minimum wage for everyone else was last raised in 2009, the tipped minimum wage has stayed at the same level for over two decades, losing 40 percent of its value. It’s now 29 percent of the minimum wage for all other workers, the lowest share since it was established in 1966.
But President Obama is pushing to change that as part of his campaign to raise the minimum wage. He has proposed raising it to $4.90 by 2016 and then pegging it at 70 percent of the minimum wage for all other workers. Here are four reasons to focus on increasing the tipped minimum wage:
1. Rampant Poverty
Given the low wages, restaurant servers experience poverty at nearly three times the rate of the rest of the workforce. As a report from the White House’s Council of Economic Advisers (CEA) points out, workers in predominantly tipped jobs are twice as likely to experience poverty as other workers. Servers are also twice as likely to have to turn to food stamps to feed themselves. The CEA notes that about half of workers in tipped occupations would get a boost in earnings under President Obama’s proposal.
2. Gender And Race Issues
Women held nearly two-thirds of tipped jobs as of 2012, including making up 70 percent of restaurant servers. People of color similarly make up large majorities of these jobs, representing 40 percent of all tipped workers despite being 32 percent of the general workforce. They are also more than half of the tipped and restaurant workers who make so little they fall below the poverty line. Both groups would be the majority of those affected by a wage increase.
3. Wage Theft
Technically, those who employ tipped workers are supposed to pay them extra if their tips don’t bring their hourly wages to at least $7.25 an hour. But all too frequently, employers dodge that responsibility. More than one in ten say their hourly wages are less than that, even with tips. More than 13 percent of say their employers misappropriated their tips, for example by making them share tips with managers or non-tipped coworkers. As the CEA’s report notes, “This provision is difficult to enforce,” and in response President Obama has called for a $41 million increase in funding for investigators at the Department of Labor’s Wage and Hour division to better police the industry’s abuses.
4. Job Growth
All of these problems plaguing tipped workers — high rates of poverty, rampant wage abuse — are likely to affect a growing pool of people. Food services and drinking places have consistently added jobs in recent months, with an average of 27,000 added every month last year. That means more people relying on below poverty-level wages.