Raising the Tipped Minimum Wage Does More Harm Than Good

Politicians and interest groups playing the gender card to push their agendas is nothing new. But recently, it seems to be getting harder, as they are grasping at straws. Rep. Donna F. Edwards (D-Md.) recently introduced legislation to increase the tipped minimum wage—the base a restaurant must pay its workers before the employee receives cash tips—claiming that restaurant workers’ wages, especially female worker’s wages, have been stagnant for years. Yet a quick look at the facts shows their claims do not stand up to scrutiny.

Rep. Edwards teamed up with the labor advocacy group Restaurant Opportunities Centers United (ROC) to push the bill. ROC, which has strong ties to unions such as UNITE-HERE, uses pressure and intimidation tactics to force restaurants into acceding to union demands. It has received large settlements from restaurants who see paying them to go away as less costly than an expensive court battle.

On February 13, ROC held a congressional briefing, “Gender Equality in the restaurant Industry,” at which speakers equated the tipped minimum wage with gender discrimination, and thus claimed that the restaurant industry discriminates against women because they constitute a majority of all wait staff. No doubt ROC will use those claims—and its political connections—to harass restaurants that do not give into its demands.

ROC’s supporting evidence derives from its new study, “Tipped over the Edge,” which supposedly “documents the gender inequity that results from the low wage paid to tipped employees even as the industry continues to profit.” The study provides statistics to help bolster support for Rep. Edwards’s Working for Adequate Gains for Employment in Services (WAGES) Act (H.R. 631). The Act would raise the national tipped minimum wage from $2.13 an hour to $5.50 an hour within two years.

ROC and Rep. Edwards’s gender wage discrimination argument relies heavily on the myth that there is no upward mobility in the industry. Ironically, two of the speakers at the ROC briefing debunked this myth, however unwittingly. Rep. Edwards recalled how she waited tables when she was younger. Another speaker told of how she worked in almost every aspect of the industry before eventually owning a Mexican Restaurant in New York, telling the crowd, “I have never forgotten what it was like to start at the bottom.” [Emphasis added]

Notwithstanding a former waitress eventually winning a seat in Congress and another owning a New York Restaurant, at the ROC briefing, one of the speakers claimed that, “tipped workers [a majority of whom are women] haven’t received a raise in 20 years.” The authors of the ROC study lament, “Unfortunately, under the federal minimum wage for tipped employers, millions of restaurant workers, including waitresses and servers, are only making $2.13 per hour, a mere $4,430 per year.”

Unfortunately for ROC and Edwards, this argument does not hold water. First, the Federal Labor Standards Act stipulates that if tips do not equal the federal minimum wage the employer must make up the difference. Therefore, it is already illegal for waiters to earn less than $7.25 an hour, no less a measly $2.13 per hour.

Second, the line of reasoning that says that tipped workers have not received a raise in 20 years is fundamentally flawed. It assumes, over 20 years, tips for restaurant wait staff never increased. That is impossible; tips are a percentage of the bill, and as the cost of dining out since 1992 has increased, so have tips.

Third, government mandates imposing above-market wages are inherently flawed. Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor and now a senior fellow at the Manhattan Institute, has long argued that raising the minimum wage hurts the very workers it is trying to help. She recently noted that it “prevents workers getting their foot on the bottom of the career ladder. The federal government is essentially taking away the right to work for low-skill workers.” The same is true for raising the tipped minimum wage. If the tipped minimum wage is raised restaurants would not be able to hire as many workers making that wage.

A raise in the tipped minimum wage would then adversely affect the very women ROC and Rep. Edwards purport to be trying to help. The WAGE Act will disproportionately increase unemployment and restrict entry into the restaurant job market for women. ROC’s and Rep. Edwards’s politically motivated agenda would cause women greater harm than good.