Murphy’s minimum wage bill would stiff waiters and waitresses

Among its other bad features, Sen. Chris Murphy’s (D-CT) proposal to raise the federal minimum wage to $25 an hour would also eliminate the subminimum wage for tipped workers. That provision would likely reduce jobs for waiters, waitresses, and other service sector workers, most of whom already earn much more than the federal minimum of $7.25 an hour. And those who stay employed won’t necessarily see a boost in their wages.

At first glance, it is unclear why eliminating the subminimum wage for tipped professions would be necessary, even to those who accept the false argument that the federal minimum wage must also be a living wage. Who cares if the money comes from employers or directly from customers, so long as it ends up in the worker’s pocket?

There is one group that has long held a grudge against the practice of tipping: unions. Murphy’s legislation notably has the endorsement of the Service Employees International Union (SEIU) and other labor groups. Unions have long tried to get rid of tipped wages, not because they’re a problem for workers, but because they’re a problem for the unions themselves.

A union’s power comes from its ability to negotiate contracts with employers over wages, working conditions, and such. Tipping circumvents this. The money flows directly from the customer to the worker, bypassing the employer. That means it bypasses the union too. A union cannot negotiate with employers over tips because the employer has no control over what the customer gives. Consequently, professions where most of the money comes through tips have historically been harder for unions to organize. Workers see little need for collective bargaining if most of their earnings come from customers. Unions have long disparaged tipping for that reason, even to the point of trying to label the practice as somehow racist.

Saru Jayaraman, co-founder of the union-affiliated Restaurant Opportunities Center, praised the Living Wage for All Act for ending “every subminimum wage for tipped workers, youth workers, and workers with disabilities, so that ‘for all’ finally means for all.”

The federal tipped subminimum wage allows workers to be paid as little as $2.13 an hour if the employer ensures that the worker receives at least enough in tips – called the “tip credit” – to make up for the gap with the overall federal minimum wage. If the worker does not get enough tips to do that, then the employer must pay the difference. Regardless, the worker usually keeps all of the tips they get.

The trade-off is simple and for most workers and employers it is a good deal: the tips take the place of wages. It allows employers to keep labor costs low while giving workers the chance to earn even more through tips than they might have with a regular wage. It doesn’t matter to the worker where the money comes from so long as they get to keep it.

While $2.13 is the federal minimum, states can impose their own tipped wage rules and many do. Many have higher basic minimum wages than the federal level and thus have higher tip credit requirements to match. Some states also set the subminimum wage for tipped employees higher than the federal level of $2.13.

The actual median hourly wage for waiters and waitresses in the US, including tips, is $16.23, or about $34,000 annually, according to the Labor Department. It is hard work and not glamorous, but it is also a job that anyone can do, that people can frequently find and that can go a long way to paying the bills. Tips are a major reason why. Tips are taxed by the IRS, though there is now a deduction up to $25,000 for that.

Restaurant owners are already struggling with higher costs thanks to rising food prices. Forcing restaurants and other businesses that employ tipped workers to pay at least $25 an hour would be a real problem for many. They would likely respond by cutting jobs, cutting back hours, or using more automation. Notice, for example, how many restaurants now encourage customers to use QR codes to place orders through their phones.

Washington DC’s similar tipped wage phase-out Initiative 82 was cited by local restaurants time after time as the top reason for their closures. The initiative proved so unpopular that the DC City Council partially rolled it back last year.

That happened in the same city where Sen. Chris Murphy works. You would think he would have noticed.