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"Restoring the Minimum Wage for America’s Tipped Workers"

The National Employment Law Project has just release a report, Restoring the Minimum Wage for America’s Tipped Workers. Here is the executive summary of the report:

In 2007, Congress finally raised the federal minimum wage for the first time in ten years, giving millions of low-wage workers a modest raise to $7.25 per hour by 2009.1 But for millions more low-income employees like the waitress at your local diner, paychecks have not budged.

Workers who rely on tips are subject to a special tipped worker minimum wage, which has remained frozen since 1991 at a meager $2.13 per hour—just $4,430 per year for a full-time worker. Congress has overlooked this little-understood part of our minimum wage system the last few times that it has increased the minimum wage. The result has been to drag down pay for tipped workers in many of our nation’s fast-growing service industries, such as restaurants, hotels, nail salons, and car washes, where millions today spend their careers.

The overwhelming majority of tipped workers are adult women—many of them supporting families. They are hurt the most by the frozen tipped worker minimum wage, which is an under-appreciated factor in the unequal pay that working women continue to receive across our economy.

Despite their stagnant wages, most tipped workers still earn a couple of dollars more than the full minimum wage once their tips are added in. In fact, if their tips are not enough to bring them up to the full minimum wage, their employers are required to make up the difference. But the tipped worker minimum wage was meant to do more. When it was created by Congress, it provided tipped workers an economic cushion and brought their pay closer to a living wage—something our economy badly needs more of today. That is what the tipped worker minimum wage used to do when it was higher—and what it still does today in the states that have not let it erode.

The low minimum wage for tipped workers, which forces these employees to subsist almost entirely on tips, is a key factor behind falling living standards and growing economic insecurity for workers in tipped industries. Since the tipped worker minimum wage was frozen at $2.13 in 1991, its value has fallen by 36% in real terms.

Workers who are forced to rely mainly on tips see their paychecks fluctuate widely, frequently leaving them unable to pay their bills or provide for their families. This problem is now worse than ever because economically squeezed customers are leaving smaller tips. As a result, waitresses and waiters—the largest group of tipped workers—have three times the poverty rate of the workforce as a whole.

The solution is to guarantee tipped workers a strong minimum wage that is paid directly by their employers. That is what the federal Fair Labor Standards Act (FLSA) did historically and what many state minimum wage laws still do today. Thirty-two states have preserved or adopted stronger protections for tipped workers, and by 2010 over half of those will guarantee tipped workers 60% of the full minimum wage—the level of protection that the federal minimum wage provided tipped workers until 1989. These states have found that a strong tipped worker minimum wage raises living standards for this growing workforce without hurting business growth.

Congress and the rest of the states should follow their lead by restoring protections for the nation’s millions of tipped workers. Specifically, they should:

1. Substantially raise the tipped worker minimum wage. For starters, Congress and the states that currently have weak protections should restore the tipped worker minimum wage to at least its historical level of 60% of the full minimum wage. But over the longer term, the federal and state tipped worker minimum wages should be raised to 100% of the full minimum wage as seven states have done.

2. Make the tipped worker minimum wage increase automatically when the full minimum wage increases by making it a fixed percentage of the full minimum wage or a fixed dollar amount less than the full minimum wage.

3. Strengthen protections against “tip stealing” to ensure that managers or employers do not skim off a portion of workers’ tips.

4. Fight attempts to roll back tipped worker minimum wages in states that already provide strong protection for these workers.

This entry was posted by Edward at 8:09 PM, 23 July 2009 | Categories: Wage & Hour

The picture above was made in 1914 by the Birmingham Engraving Co. This reproduction is from the Library of Congress Prints and Photographs Division Washington, D.C. 20540 USA.

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