A Higher Minimum Wage is Good for Tipped Workers

April 4, 2017 by
James Myall

James Myall

Workers who rely on tips don’t benefit from the existence of a lower tipped minimum wage. That’s the conclusion of a variety of sources that compare the earnings of workers in those states without a “tip credit” and those which maintain one. Maine’s tipped minimum wage is due to be gradually phased out by 2027, but a series of pieces of legislation have been introduced to roll back the decision of Maine voters last November, which would lower earnings for 20,000 tipped workers in Maine.

Recent analyses by two card payment service providers, Square and Simple, of the millions of transactions conducted by their customers, revealed the size and frequency of tipping across the United States. Both studies found that customers in the seven states with no tipped wage left tips of at similar size and with greater frequency than customers in the rest of the country. This debunks the claims by minimum wage opponents that workers will see smaller tips if the tipped minimum wage is phased out.

Tip size Frequency of tipping
Square Simple Square
States with no tipped minimum 16.0% 13.8% 57.3%
Other states 16.1% 13.2% 55.1%

Sources: MECEP analysis of Square and Simple data.

 

Because customers continue to tip wait staff, hairdressers, taxi drivers, and other employees in states with a tipped minimum wage, these employees enjoy increased earnings and a better standard of living. Data from the Bureau of Labor Statistics show that self-reported earnings (including tips) are higher across the board for tipped workers in the states where they are treated equally with other workers.The Congressional Budget Office identified a series of sectors in which workers rely on tips for income. In all eleven occupation groups, hourly earnings for tipped workers were higher in the states without a tipped minimum wage.

tipping by group

Source: MECEP analysis of US Bureau of Labor Statistics, Occupational Employment Survey, May 2016 data. Median hourly wages are weighted for the employment size of tipped-wage sectors in each state.

 

The same data set shows that the earnings increase is true across the pay range. The lowest-paid 10% of tipped workers see an income boost, as do the highest-paid 10%. For those who earn the least, this increase is the most impactful. For the lowest-paid 10% of tipped workers, the annual increase in earnings for those in states without a tipped wage is $2,000, a pay raise that takes them from just above the poverty level for a family of two and enables opportunity. That translates into food on the table, school supplies, or making rent.

Tipping by percentile

Source: MECEP analysis of US Bureau of Labor Statistics, Occupational Employment Survey, May 2016 data. Hourly wages are weighted for the employment size of tipped-wage sectors in each state.

 

Legislators, employees, and business owners who are truly concerned for the well-being of their staff should be embracing the decision made by 421,000 Mainers in November. It’s time to end special treatment for those who employ tipped workers, and move us closer to an economy that works for everyone.

 

Leave a Comment