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Under federal law, tipped workers can be paid as little as $2.13 an hour by businesses
Not long ago, Alexandria Ocasio-Cortez was serving drinks in the Bronx. Now the youngest ever member of Congress, she recently got back behind the bar in support of a campaign called One Fair Wage.
“We have to raise the national minimum wage to $15 an hour, nothing less,” she said at the event organised by lobby group Restaurant Opportunities Centers (ROC) United.
The US federal minimum wage currently sits at $7.25 (£5.70) an hour – but that bottom amount falls to just $2.13 (£1.68) in jobs where workers can expect tips from customers.
The law understands this as anyone who “customarily and regularly” receives more than $30 a month. So it’s normal for workers like car washers, bar staff and salon workers to be paid below minimum wage by their employers.
Many cities and states have higher pay requirements than the national rules, but a staggering 43 of the 50 states have different wages in jobs where tipping is customary.
This explains, in part, why tipping etiquette feels so alien to visitors to the US.
There are rules and regulations in place to safeguard workers. The Fair Labor Standards Act (FLSA) only allows employers to pay a lower rate if the employee makes enough in tips to make up the difference. If their tips don’t reach the minimum wage threshold – business are supposed to pay up.
But campaigners say this doesn’t always happen.
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ROC United
The minimum wage for tipped workers has not risen for almost three decades
They insist that the current system leaves employees open to wage theft, causes income instability, perpetuates racial and gender inequities and leaves tipped staff vulnerable to harassment.
They want the tip credit system to end with one set minimum wage – which sounds like it would be a popular idea, right? But these proposals are actually pretty controversial among businesses and workers alike.
‘Not the majority’
Last summer, the ROC put forward a ballot – Initiative 77 – in Washington DC calling for the abolition of the tipped rate. It would phase out the current $3.89 hourly wage in place, until it matched the standard minimum wage target of $15 by 2026.
After a fierce campaign, DC voters narrowly passed the measure. But before any changes came in, the initiative was repealed by local council officials.
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Mark Lee is a former small business owner and newspaper columnist who campaigned against the minimum wage increase.
“The overwhelming majority of bar and restaurant and nightclub tipped employees opposed it and spent a lot of energy and a lot of time campaigning against it,” he says.
“Look, the tip wage system works great here, because it sets a ceiling, not a floor, on wages,” Mark adds.
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DC workers testified in favour of Initiative 77 being repealed
This means that many workers, in practice, are able to make multiple times the minimum wage – despite only being paid $2 or $3 an hour by their employer.
“So instead of making $35 or $40 an hour, you’re going to end up making only, let’s say $18 an hour, right?” says Mark, who fears customers won’t tip if they know their waiter or waitress is getting a higher statutory wage. “So it fundamentally would change the entire economic structure of the hospitality and nightlife businesses.”
He says many in the industry fear radical wage increases would directly impact customers: pricing them out, making them less likely to tip and ultimately causing job losses.
‘Hundreds of dollars’ a night
Valerie Graham has done bar work in DC for two decades – both as a main profession and as a second source of income. She believes the flexibility of working under the tipping system benefits her as a single mother, empowering her with “significant” earning potential.
“I’d have my full-time job and then I was going to work maybe five to seven hours on a weekend and walk away with my tips in cash,” she says, adding that this could often amount to “hundreds of dollars a night”.
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But high tips are not a given for all tipped workers. Some shifts are busier than others and how much you earn will depend on where you work and how much you directly interact with customers.
Arrangements vary, but many businesses have tip-sharing agreements in place so that back-of-house staff get a share too.
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Caitlin Schiavoni
Valerie says she has never made below minimum wage while serving
Valerie recognises some in the industry are struggle, but disagrees that a “one-size-fits all solution” makes sense.
She also believes the flexibility of the tip-credit system allows businesses to give workers from a wide range of backgrounds opportunities.
“This industry here is the industry of second chances,” she says. “People can start over, you can lose your job and have a restaurant job by the end of the week and start making money so that you don’t fall behind on your mortgage.
“If you’re paying $15 an hour, are you going to hire Susie, who’s home from college? Or Joe just got released from jail? Are you willing to take that same risk on a person when the cost of hiring is so much more?”
In some ways the DC effort shows how difficult it is to institute the change,
Governor Andrew Cuomo advanced a process to review New York’s two-tiered wage system at the end of 2017. But businesses have held firm on their opposition and more than a year on, he’s still not implemented the measure.
Like DC, the US state of Maine also voted to abolish the tip credit system, but it was swiftly reinstated after a wave of pressure and complaints.
‘An equality issue’
Anthony Advincula, Public Affairs Officer for the ROC, believes a lot of the concerns about the survival of the industry are overstated and points out seven states, including California, are already without a two-tiered wage system.
“Of course there are people who benefit from tipping, especially those who work in high-end restaurants, but that’s not the majority of the workforce,” he says about their One Fair Wage campaign.
“If you look at the demographics of tip workers in the United States – 70% of them are women. The majority of them are people of colour and so this is an equality issue,” he says.
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Jane Fonda (right) is pictured with ROC co-founder Saru Jayaraman at a workers rights event
He says the ROC isn’t against the abolishment of tipping altogether, just industry over-reliance.
They also say dependence on tips perpetuates endemic harassment – a cause endorsed by famous faces from #TimesUp including actresses Sarah Jessica Parker and Amy Schumer.
Marisa Licandro, 23, has worked in Brooklyn’s restaurant industry for six years and describes harassment within it as “routine”.
“I’ve experienced harassment from customers, co-workers, management itself,” she says, describing everything from explicit nicknames to customers not taking rejections for dates.
Marisa also believes change is necessary because the unpredictability of earnings makes it “pretty difficult” to plan for the future.
“In what other industries does your employer outsource your pay to other people or to the customers?” she says. “It’s a system that when we really think about it doesn’t make sense.”
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Marisa Licandro
Marisa believes minimum wage increases would increase dignity among the workforce
But other workers, like Valerie, reject the narratives forming around her industry.
“This is a thing that they like to talk about,” she says. “That women are selling their bodies for tips, they’re working for slave wages, they’re living in poverty, they’re on food stamps, and they can’t afford to live. And we’re saying you don’t know us.”
She believes current laws should be enforced more rigorously, without upending the service sector.
“It’s like, if you want to talk about sexual harassment, let’s talk about it. If you want to walk about wage theft, let’s talk about it,” she says. “There are always going to be bad actors. But let’s talk about enforcement, because this stuff is already against the law.”
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The Democrats introduced the #RaiseTheWage Act to the House in January 2019
The ROC isn’t alone in wanting an overhaul of the US wage system. Other groups like FightFor15 have been lobbying for change in recent years too.
Parts of the complaints come because the current US federal minimum wage of $7.25 hasn’t increased since 2009 and the tipped rate hasn’t gone up in almost three decades – since 1991.
When the Democrats took control of the House in 2019, they reintroduced the Raise the Wage act – a plan to gradually increase the federal minimum wage to $15 per hour by 2024 and phase out the tipped differential.
But their efforts seem to have stalled since. Any proposed changes would also face a difficult route to approval through the Republican-controlled Senate.
Despite these obstacles, the issue doesn’t seem to be going away anytime soon.
Workers’ rights are already emerging as a key issue in the 2020 election, with a host of Democratic primary candidates already embracing the proposal of a federal $15 minimum wage for all.