When you eat at a restaurant, you tip your server. That money isn’t just an added bonus for the wait staff; it’s part of their wages.
Tipped workers are paid differently than non-tipped workers, who earn a flat rate. The front-of-the-house staff can take in more money on a good night even if the kitchen staff — which typically receives non-tipped wages — works just as hard.
Some states and restaurateurs, like New York’s Danny Meyer, have eliminated tipping with mixed results. Here’s why it’s hard to get rid of tips.
Businesses pay tipped workers a small fraction of the minimum wage.
But if the tips that workers receive fall short of the minimum wage, employers must make up the difference.
Tipped workers earn $3.33/hour. If tips fall short of $12.50/hour minimum wage, employers pay the difference. In 2020, the tipped minimum wage will increase to $5/hour.
In June, D.C. residents voted to pass the Minimum Wage Amendment Act, which will eliminate tipped wages. The D.C. Council can strike it down. If it doesn’t, here’s how wages would work.
Tipped wages would phase out over the next seven years until businesses pay the full $15/hour minimum wage (with increases tied to inflation) for all workers. Restaurants would pay those labor costs.
Tipped workers. Back-of-the-house cooks receive nothing even if diners love their food.
A flat wage guarantees a steady income to waiters, regardless of whether they are working a busy shift, or whether a customer is generous or stingy with gratuities.
Restaurant owners who eliminate tipped wages must make up the cost, and it’s typically more than the 20 percent tip most diners add to the bill.
For the most part, you. Restaurants increase prices to cover higher insurance rates, payroll taxes and back-of-the-house labor costs.
Seven states have eliminated tipped wages. But that hasn’t stopped diners from tipping “at nearly normal rates,” says Cornell University professor Michael Lynn, an expert on tipping.
Yes, if they’re already struggling. A Harvard study found restaurants with a Yelp rating of 3.5 stars or lower are 14 percent more likely to close if minimum wages increase.
Credits: Text by Tim Carman, Fenit Nirappil and Jayne Orenstein; Graphics by Sarah Hashemi, Design by Matthew Callahan