Various denominations of U.S. currency.
Listen to Marketplace each weekday at 3 p.m. on NPR 89.1. This story originally aired on “Marketplace” on Oct. 21.
Among the slew of ballot initiatives across the country, many could affect the economy on a state-by-state basis. In Arizona and Massachusetts, for instance, there are proposals affecting the minimum wage for workers who get tips — which is lower than the standard minimum wage.
Federal law as well as the laws in many states allow employers to pay certain workers less than the minimum wage, as little as $2.13 per hour, so long as their tips bring them up to the actual minimum wage where they are.
“Employers are legally required to ensure that tipped workers' tips cover the gap between the tip minimum wage and the regular minimum wage. But, in practice, this is highly difficult to enforce,” said Sebastian Martinez Hickey a state economic analyst at the Economic Policy Institute.
“Tipped workers are very low-paid workers. They earn about a third less than the median worker in the U.S. economy, and they experience poverty at much greater rates than the typical worker,” Martinez Hickey said. These workers, he added, are “predominantly women, disproportionately women of color.”
In a handful of states, plus Chicago and the District of Columbia, voters decided in recent years to slowly phase out the tipped minimum wage. The restaurant industry has vigorously opposed those moves, arguing that it raises prices for patrons and increases labor costs to the point that eateries have to cut staff hours, eliminate jobs and sometimes even shut down.
“There was legislation to eliminate the tip credit this year in 13 states and three localities,” said Mike Whatley, vice president of state affairs and grassroots advocacy at the National Restaurant Association. “And critically, tipped workers, operators and even customers spoke out and said, 'This is a bad idea.' And so, in all 13 of those states, that legislation and those big localities failed to move forward.”
Whatley pointed to jobs data revealing changes in the Washington, D.C., restaurant industry since it began rolling back the tipped minimum wage in 2023, which has triggered many restaurants to add fees and raise prices.
“Since that initiative began phasing in last May, over 1,800 full-service restaurant employees have lost their jobs in D.C.," Whatley said. "All at the same time, quick-service restaurants have actually added 300 jobs.”
Neither the National Restaurant Association nor a D.C. restaurant group could find a restaurant that publicly acknowledged they had to cut jobs because of the change to the tipped wage. Supporters of the phaseout blame other trends for the job losses, like a general pullback in consumer spending or lasting impacts on the industry from the pandemic.
Advocates for eliminating the tipped wage are continuing their push, including an initiative on November's ballot to phase it out in Massachusetts.
“The proposal is to raise that base wage rate from $6.75 up to the full Massachusetts minimum wage of $15 an hour, and it's proposing to do that over five years,” said Jeannette Wicks-Lim, a research professor at the University of Massachusetts, Amherst. She and colleague Jasmine Kerrissey studied how the change would affect the state’s restaurant industry.
After factoring in things like inflation, what restaurant workers are already making and the share of workers that receive tips in a particular business, Wicks-Lim and her colleague estimate that “The cost increase to bars and restaurants … would be something on the order of about 1% of their sales revenue. So pretty modest cost increase.”
The National Restaurant Association pointed to other research from Carnegie Mellon University, which found that “a strong majority of tipped employees (86%) agree that the current tipping system works well for them and does not need to be changed.”
In Arizona, a markedly different proposal on November’s ballot would preserve the tipped minimum wage in the state. Opponents of the measure argue it would actually reduce wages for tipped workers.
One reason for this, according to Geraldine Miranda, an economic policy analyst at the Arizona Center for Economic Progress, is that the tipped wage would no longer be tied to inflation, unlike the regular state minimum wage.
“Tipped wages will start to fall back instead of progressing a little with the progression of our state minimum wage,” said Miranda. And, in the future, “it will make it very hard to get tipped workers back to the progress that is being made for nontipped workers.”
Advocates trying to get rid of the tipped wage nationally are worried that if a move like this passes, it could be replicated in other states to quash efforts to boost wages for tipped workers. That's why groups like Raise the Wage Arizona are spending millions of dollars trying to defeat the measure in November.
By submitting your comments, you hereby give AZPM the right to post your comments and potentially use them in any other form of media operated by this institution.