War of the Wages: Will Tipped Employees Get a Raise?

Tipped employees haven't had a wage increase since the early '90s. Is that all about to change?
March 21, 2013

In 1991, members of the U.S. Congress were paid $101,900 annually. Today, they are paid $174,000 per year. Compare that to the wages of Americans who depend on tips to earn a living: In 1991, these workers were guaranteed a federal minimum wage of $2.13 per hour in pre-tip income. Today, their pre-tip federal minimum wage is still $2.13 per hour.

Why have federal laws on restaurant workers’ minimum wages remained unchanged for 22 years, while the salaries of the people who determine minimum wages have increased 71 percent? The question has become more relevant since President Barack Obama during his State of the Union speech proposed an increase in the federal minimum wage, the first proposed increase since 2009, from $7.25 per hour to $9 per hour by 2015. If you own a restaurant, a proposed minimum wage increase could affect your tipped employees' wages as well.

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As pointed out on a chart by The Huffington Post, the minimum wage and the tipped minimum wage rose together until 1996. That year, though, Congressional Republicans wouldn’t support a minimum wage hike unless the minimum wage for tipped employees remained the same. The change was the result of intense lobbying by the National Restaurant Association (NRA), which was led by 2012 GOP presidential candidate Herman Cain.

Obama’s plan to raise the minimum wage spurred restaurant workers to rally in Washington, D.C., on February 13, the day after the State of the Union speech, for an increase in tipped minimum wages as well. Organizations like the Restaurant Opportunities Center support U.S. Rep. Donna Edwards’ (D.-Md.) plan to raise the tipped employees’ minimum wage from $2.13 per hour to $3.75 per hour within three months.

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Many people believe that an increase in the tipped employee minimum wage is unnecessary: According to the Fair Labor Standards Act, employers are required to pay the difference if an employee's wages per hour—$2.13 plus their tips for that hour—don't equal $7.25 per hour.

The problem is that the law isn't being enforced, say organizations such as the National Employment Law Project, which is lobbying for an increase in the tipped minimum wage. In fact, a 2009 report by the U.S. Department of Labor’s Bureau of Labor Statistics concluded that almost 2.6 million Americans were being paid below the federal minimum wage.

Conversely, the NRA continues to favor restaurants paying tipped employees a minimum wage of $2.13 per hour. It says that “most” waiters and waitresses earn more than $7.25 per hour and a minimum wage hike would “force employers to redirect payroll dollars away from employees who do not earn tips,” NRA spokeswoman Katie Niebaum told The Huffington Post.

Since 1996, numerous states have raised tipped employees’ minimum wages. Currently, six Southern states have no minimum wage for tipped employees, 12 states have a tipped employees’ minimum wage of $2.13 per hour, seven states have a tipped employees’ minimum wage between $2.14 and $2.99 per hour, and five states have a tipped employees’ minimum wage between $3 and $3.74 per hour.

If Edwards’ plan passes, it would increase how much businesses have to pay their tipped employees in 30 states. The restaurant industry continues to lobby fiercely, and are trying to persuade lawmakers to reduce the tipped employees’ minimum wage in Arizona and Florida, two states whose tipped minimum wages are among the highest in the nation.

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Photo: Getty Images