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Tipped Workers Hope for Hike in Sub-Minimum Wage

Monday, February 6, 2012

After decades of enduring frozen wages, the nation's 3.3 million tipped workers -- most of whom are women -- may receive a minimum-pay hike. This could alleviate what economist Sylvia A. Allegretto calls an under-appreciated factor in women's poverty.

Subhead: 
After decades of enduring frozen wages, the nation's 3.3 million tipped workers -- most of whom are women -- may receive a minimum-pay hike. This could alleviate what economist Sylvia A. Allegretto calls an under-appreciated factor in women's poverty.




waitress(WOMENSENEWS) -- Low-wage workers' advocates predict that 2012 will be a banner year for waitresses, retail clerks and other tipped workers.

After decades of enduring frozen wages, the nation's 3.3 million such workers -- most of them women -- may receive an increase in their minimum pay.

Amy Hanauer, executive director of Policy Matters Ohio, a nonprofit research group with offices in Cleveland and Columbus, says protesters in the nationwide Occupy encampment are helping this cause.

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"Thanks to the Occupy movement, more voters are aware of inequality and the terrible toll it takes on low-wage workers and their families," says Hanauer. "Support is growing for increasing the minimum wage of tipped workers who work hard, but have fallen farther and farther behind because their wages don't cover their basic needs."

The pay of tipped workers has languished because an obscure federal provision, called the tip credit, has established a sub-minimum wage for tipped workers: $2.13 per hour or $4,333 a year for a full-time worker. The federal full minimum wage is $7.25 per hour, or about $15,000 a year for a 40-hour workweek.

Raising the minimum wage may alleviate what researcher Sylvia A. Allegretto calls an under-appreciated factor in the poverty of women.

"The sub-minimum wage hits women hard because 72.9 percent of tipped workers are women compared to less than half the overall labor force," says Allegretto, co-chair of the Center on Wage and Employment Dynamics at the Institute for Research on Labor and Employment of the University of California, Berkeley. "The federal tipped minimum wage was originally 50 percent of the regular minimum wage, but it has eroded over time to just 29.4 percent of the current minimum wage for all workers because it has been frozen since 1991 unlike the federal minimum wage, which was raised in 2007."

Gender Gap in Tips

Allegretto's research shows that female tipped workers, overall, average 50 cents less per hour than their male counterparts because they are employed in lower paying sectors, such as food service and home health.

Among wait staff, the wage gap is even worse: women earn 83 cents less per hour than do men because they are more likely to be employed by fast food restaurants than fine dining establishments.

"Even in good times, tips are volatile," says Allegretto, who worked as a waitress for seven years. "The weather, the time of day and the customer's mood all affect the size of tips. During recessions, customers spend less, so tips plummet. Many tipped workers sink into poverty because they are less likely than other workers to have benefits, such as health insurance and sick days they can tap to get through an emergency."

Rep. Donna Edwards, a Maryland Democrat, introduced a bill in 2009 that would have increased the tipped minimum wage to 70 percent of the regular minimum wage by 2012. Opposition by Republicans and the restaurant and hospitality industry, which employs the largest number of tipped workers, stymied the bill. Edwards plans to reintroduce the bill this spring.

But advocates are looking past Congress and pinning more hope on the states, many of which have stepped ahead of federal lawmakers.

Over half the states and the District of Columbia have tipped credits that are higher than the federal standard. These range from $2.33 an hour in Wisconsin to $7 in Hawaii.

Washington is one of seven states that has no tipped credit law. Employees' tips are excluded from the calculation, so employers pay the state's full minimum wage, $9.04 an hour, the highest in the nation.

Higher Wage Benefits

"Unlike Congress, state legislatures have been more receptive to raising the sub-minimum wages of tipped workers because studies have shown that increasing the wages of tipped workers doesn't kill jobs, even during recessions, as opponents have claimed," says Marilyn Watkins, policy director of the Seattle-based Economic Opportunity Institute of Washington, a public policy center dedicated to restoring the promises of the middle class. "Indeed, higher wages benefit employers by decreasing employee turnover and improving morale and productivity."

Watkins predicts that many states will raise their minimum wage standards for tipped workers this year because of changes in the labor force. Three-fourths of the jobs added to the economy since the 2007-2009 recession have been in low-wage service sectors.

"States recognize that improving the wages of tipped workers is critical because a job should help you get out of poverty, not keep you poor," says Watkins. "More workers will be spending their careers in these industries because better-paying jobs in manufacturing and other fields are not expected to increase in the years ahead."

Madeline Talbott, chief organizer of Action Now, a Chicago-based, grassroots organization of working families that advocates for economic change, predicts that Illinois will eliminate its sub-minimum wage for tipped workers (currently $4.95 an hour) when the legislature considers a package of bills this spring to increase the overall state minimum wage from $8.25 to $10.65. Last year, a poll found that 71 percent of voters supported these changes.

State Economies Boosted

"State legislatures are more likely to pass economic bills like this in presidential election years," says Talbott. "The recent recession -- the worst since the Great Depression of 1929 -- has shown legislators that an increase of a few hundred dollars in a tipped worker's annual wage not only benefits the worker, but the state economy. Low-wage workers spend the increased funds on groceries, school supplies for their kids and other necessities that create jobs for other workers."

"Enforcement is also crucial," says Jeff Mansfield, an organizer with Restaurant Opportunities Center of New York, which was founded after Sept. 11, 2001, to help restaurant workers displaced by the attacks on the World Trade Center. "Many tipped workers are shortchanged by employers because they don't know or understand the law."

Restaurant Opportunities Center of New York has won nine campaigns against abusive restaurants totaling over $4.9 million in discrimination and unpaid wages.

If an employee's tips plus paid wages of at least $2.13 an hour don't equal the federal minimum wage of $7.25 per hour, the employer must make up the difference. However, a national study of low-wage workers in New York, Chicago and Los Angeles in 2009 found that 30 percent of tipped workers surveyed were not paid the tipped worker minimum wage.

"Tip stealing is also common," says Mansfield. "Owners and managers often take a share of tips, even though state laws stipulate that the money belongs to the service staff. Restaurant managers may also pocket fixed gratuities or customer service changes. Many workers are afraid to report these abuses for fear that they will be fired."

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Sharon Johnson is a New York freelance writer.