Did you know that there is a minimum wage, a separate tier if you will, that is much, much lower than the national minimum wage? The minimum wage is currently set at $7.25 nationally and Virginia has almost always tracked its minimum wage with the national rate. Alas, it’s not much to live on. Indeed, 40 hours a week at the minimum wage puts you below the poverty line. Nonetheless, a surprisingly large number of people try to get by on it. But there is a minimum wage that’s far lower than that.
It’s the minimum wage for tipped workers. This is a strange and hard-to-define sector of the economy. The U.S. Department of Labor doesn’t define what jobs are tipped. Their rule is that if an employee makes more than $30 a month in tips, they’re a tipped worker. These people include waiters and waitresses, hairdressers, barbers, taxicab drivers, doormen, parking lot attendants and bartenders. Their base pay is what’s called the “tipped” minimum wage — something I bet you’ve never heard of — which nationally and statewide is $2.13 an hour.
Is this a problem? The minimum is a floor, but if the waitress, bartender or hairdresser, earns far more, what’s the concern? The answer would be none, if indeed the tips made up the difference, but these days, they rarely do. Of course, some in the restaurant business, particularly at more expensive eateries, can be assured a pretty good flow of tips, but not everyone. The type of establishment, the time of the shift, the nature of the customers and how the economy in an area is impacting the generosity of the customers, can make a big difference in employee earnings from tips. It’s common for servers to come home having made less after their lower minimum wage and the tips are combined than the state or federal minimum wage. This problem has been getting worse over time. But, because these employees are usually at the lower end of the scale, just like the regular minimum wage recipients, their concerns don’t get much attention.
A rough estimate is that 3 million Americans work in tipped jobs. I think it’s probably much larger.
While many Americans have worked in tipped jobs during their working life, it’s still a strange sector of the economy. Tips seem like an anachronism. A throwback to times gone by. Historically people in tipped jobs, not surprisingly, held service jobs. Alas, I rarely tip my doctor, attorney, realtor or electrician. While, I always tip a waiter or waitress, my barber or an Uber driver. In days gone by, that’s the way service workers were paid. However, while that system might have worked in a different kind of economy, today these people seem to be getting left behind. Also, one thing that many people forget is that most service workers, are women.
There are some who rightly argue that tipped jobs have offered people with odd schedules or folks in need of extra money or a second job, an opportunity that the regular 9-to-5 job cannot provide. This is a sound argument, but it also shouldn’t turn into the economy of the downtrodden, either. Assuring some basic minimum, at least comparable to the national or state minimum wage, seems like good policy and the right thing to do.
Earlier this year, 17 members of the Virginia House of Delegates co-sponsored a bill that would have effectively done away with the tipped minimum wage. There would be just one minimum wage. This bill never made it out of committee. However, maybe this mechanism isn’t the best way to deal with leveling the field in this particular part of the economy. Another approach, used in the fairly lean-conservative state of Ohio required that wages and tips needed to add up to the state or federal minimum wage. If not, the gap had to be made up by the employer. It also excluded very small businesses from the requirement. It’s not perfect, but it’s eminently fairer than the current system.
At the very least, this is a situation that shouldn’t be ignored. A large part of the workforce is getting a raw deal because of an antiquated and unwieldy worker compensation system. Maybe it’s time we modernized it.
David Kerr, a former member of the Stafford School Board, is an instructor in political science at VCU. He can be reached at email@example.com.