Paying Tipped Workers Better Wouldn’t Lead to Fewer Restaurant Jobs

Under federal law, there are two classes of workers: those who make tips and those who do not, with different rules for each. Since 2009, the federal minimum wage for regular workers has been $7.25 an hour. For tipped workers, it’s been far lower for far longer — $2.13, where it’s been stuck for more than two decades. In theory, employers are expected to make up the difference if tips don’t bring workers up to the regular minimum wage. In practice, particularly in the restaurant industry, servers’ dependence on their bosses to get good shifts means few complain if they don’t get the wage gap closed.

Seven states — Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington — have eliminated the two-tiered system entirely. New York appears to be the next state that will join this trend: Gov. Andrew M. Cuomo (D) recently announced that he will hold hearings to explore setting a single statewide minimum wage for all workers. And in the District, advocates have collected enough signatures to put the issue on the 2018 ballot but are facing a legal challenge.

Opponents of this trend, notably the restaurant industry, have argued that such measures would be disastrous for restaurants, causing them to raise prices, lose business and slash jobs. Dire warnings that customers would stop tipping entirely persuaded legislators to invalidate a higher tipped minimum wage approved by referendum in Maine.

Are these concerns valid? The very fact that people haven’t stopped going to restaurants or tipping servers in California or Montana suggests that they are overblown. To gain further insight, we looked at the impact on restaurant worker earnings and employment from New York state’s last increase in the tipped minimum wage, from $5 to $7.50 in 2015, using data from the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages, which tracks employment and earnings by industry.

Read the full commentary in the Washington Post. 

Michael Paarlberg is an assistant professor of political science at Virginia Commonwealth University, an associate fellow with the Institute for Policy Studies and a postdoctoral fellow at the University of Pennsylvania. He is writing a book on diaspora politics in El Salvador, Mexico and the Dominican Republic. Follow @MPaarlberg

Teófilo Reyes is national research director of Restaurant Opportunities Centers United.