The federal minimum wage is not rock bottom.
In the midst of the intense focus and national debate on the minimum wage, we don’t want to forget a group that falls even lower on the pay scale. There’s something called the subminimum wage for tipped restaurant workers, and by law it can be a shockingly stingy $2.13.
Increases to the federal subminimum wage haven’t even kept up with the standard minimum wage.
For most of the 20th century, the subminimum wage was pegged at 50% of the standard wage. In 1991, when the minimum wage was set at $4.25, tipped workers received $2.13 per hour. In 1996 workers won a 90-cent per hour increase, but for the first time the subminimum wage was uncoupled from the standard wage and it was held at $2.13. It’s been stuck there for going on three decades. While the minimum wage has been increased four more times to its current $7.25 an hour, the subminimum wage, unchanged at $2.13, has been reduced to less than one-third of the minimum. Factor in the rising cost of living, and the buying power of the subminimum wage has effectively shrunk to $1.28.
Think about that $2.13 when you calculate a server’s tip.
It’s called a gratuity, but the way the pay scale works there’s nothing gratuitous about tips. The subminimum wage is based on the assumption that tips will constitute the vast majority of a server’s earnings. As customers we think we’re rewarding good service, but in fact we’re subsidizing the ability of restaurant owners to pay a mere pittance to their employees. Tips are necessary just to get server compensation up to the minimum wage.
While wages are stuck at $2.13, tips are trending down.
The recent recession and current recovery have kept a lid on restaurant menu prices and taken a toll on individual spending habits and corporate travel budgets. Tips are calculated on stagnant spending, and customers have gotten chintzy with that calculation.
Restaurants can also choose business practices that will erode tips.
Employers can keep payrolls down naming more of their workers to the subminimum wage category. And when those workers aren’t in typically tipped positions, it’s perfectly legal for restaurants to institute mandatory tip-sharing pools and take a cut from the servers to subsidize the paychecks of non-serving employees. They can also deduct the tip-related portion of their credit card processing fees from the tips given to servers. It’s a small amount from each tip (typically around 2%, and can go as high as 4%), but it adds up to nearly $1,000 a year for full-time workers. For a restaurant chain like Olive Garden, it can be upwards of $10 million in credit card fees that are skimmed from employee paychecks.
People for the Ethical Treatment of Servers
We have a seafood watch list, fair trade labeled imports, and we know when the eggs are cage-free. How about looking at the sustainability of restaurant workers?
There’s a measure in the Senate that will increase the minimum wage to $10.10. Let’s make sure that subminimum wage workers are included this time.