A number of state legislatures across the U.S. are beginning to look at the possibility of introducing a legislation that would require tipped employees to be paid the full state minimum wage, regardless of the amount of gratuity they receive. This movement has been gaining traction across the nation as more states begin to see the economic and labor benefits of rejecting the longstanding practice of differentiating between tipped employees and other workers.
The tipped wage system has been an economic policy tool for decades; traditionally, restaurants and other businesses that employ tipped workers are allowed to pay a lower minimum wage than they would for any other non-tipped employee. This system allows restaurants and businesses to pay lower wages while still making sure the tipped employee earns at least the full minimum wage, thanks to gratuity from customers.
However, in recent years there has been a growing complaint among workers that this system allows employers to be too lenient with their wages and even encourages a reliance on customers to make up any “wage gap”. Moreover, due to the unevenness of gratuity, some tipped employees suffer from a lack of viable wages that would enable them to meet their financial needs. This has led to a push from workers to reject the traditional tipped wage system and demand that all workers are paid the full state minimum wage.
Proponents of such a law argue that it would boost workers’ wages significantly and would also benefit employers by reducing employee turnover and associated costs. In addition, this system would also guarantee a more stable wage for tipped employees that wouldn’t be reliant on gratuity.
At present, only seven states have completely done away with the tipped wage system, while other states, including New York and Washington, are considering similar laws. These new laws would not only mean that workers would be paid the full minimum wage, but would also set clear limits on gratuity (e.g. no more than 20% of the regular wage).
The U.S. Department of Labor rejected a similar federal proposal in December 2020, but many states are encouraged, asserting that they can still implement such measures if they choose to. Ultimately, the decision is up to the state legislatures, but it is clear that the push for full minimum wages for tipped employees is growing and is something worth considering this year.
