Wage Watch: You pay 70% of your waitress’s wages

tip cash table
Tip and receipt on table in restaurant
Angela Wyant—Getty Images

Here’s a tip: You pay for 70% of your waitress’s wages

The federal government’s failure to raise the $2.13 national minimum wage for tipped workers since 1991 is not just hurting the workers who live off of those sums, it’s also dinging the bank accounts of casino, salon, and restaurant patrons more than ever before.

That’s the conclusion from a study released this week by the Economic Policy Institute.

The federal minimum wage law has two tiers. It applies separate rates to tipped and non-tipped workers. When that system was initially implemented in 1966, employers were expected to provide tipped workers with 50% of the non-tip minimum wage while customers’ tips would make up the other half. That means that, in theory, all workers would receive at least the regular minimum wage, no matter their job. But since 1991, the “tipped” minimum wage that employers must pay has remained stagnant at $2.13, while the non-tip minimum wage has inched up to the current $7.25. That means the portion of tipped workers’ take-home pay that patrons’ tips are supposed to produce has increased from 50% to just over 70%.

“Today this two-tiered wage system continues to exist, yet the subsidy provided by customers in restaurants, salons, casinos and other businesses that employ tipped workers is larger than it has ever been,” the study says.

Minimum wage hike whips through Windy City

A panel assembled by Mayor Rahm Emanuel to assess Chicago’s need for a higher minimum wage on Tuesday recommended that the city adopt a $13 an hour rate by 2018. The hike would bring Chicago’s minimum wage up from its current $8.25 rate, a raise that’s expected to affect some 410,000 workers and add $800 million to the city’s economy. The minimum wage for tipped workers would increase by $1 from $4.95 over two years, followed by annual increases based on inflation.

The panel’s recommendations follow a separate proposal from a group of Chicago aldermen to boost the city’s minimum wage to $15 an hour, which would put it on par with Seattle’s newly passed rate.

Though the panel advocated a minimum wage increase, it recommended delaying any action on the issue until after state lawmakers consider a statewide increase, which they’re expected to do after November elections.

Minimum wage hike = more jobs?

Advocates of higher minimum wages have long argued that increasing worker pay is good for the economy, and this week a study by the Center for Economic and Policy Research gave that theory some additional cred. The study found that the nine states that upped their minimum wages on January 1, 2014 have experienced more economic growth than the 37 states that didn’t institute an increase.

The study compared average employment during the first five months of this year to the last five months of 2013 and found that the 13 states that raised their minimum wage at the start of this year—Connecticut, New Jersey, New York, Rhode Island, Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Vermont, and Washington— saw an average change in payrolls of 0.99%. Meanwhile, the states without hikes experienced an increase of 0.68%.

L.A. hotel workers vie for a raise

Hotel workers in Los Angeles could soon claim the country’s highest minimum wage.

A new city ordinance that’s expected to pass by Labor Day proposes hiking those workers’ pay to $15.37 an hour—well above California’s current $9 statewide rate. Lawmakers say the workers’ pay should reflect the city’s booming tourism industry.

Hotel operators, of course, are none too pleased by the potential hike. They argue that paying workers more could force some hotels—especially smaller ones—to shut down.

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