Your Money

When you make $2.13 an hour, tips really, really matter

Key Points
  • Tipped workers experience higher levels of poverty than other employees.
  • There are also more swings in their earnings, and overall less certainty.
Thomas Barwick | Getty Images

Tracy Brasseur works as a waitress at Leo's Coney Island restaurant in Royal Oak, Michigan, from 6 a.m. to 2. p.m., five days a week.

Although she only makes $3.52 an hour – the minimum wage for "tipped" workers in the state – she was bringing home around $500 each week, thanks to those gratuities.

But lately, things have been tighter for the 46-year-old mother of two.

A construction project near her restaurant has resulted in fewer customers coming through the door. Her wages for full-time work have shriveled to around $250 a week.

"My landlord doesn't care that we have construction behind the restaurant," Brasseur said. "They want their rent money."

Advocates and workers recently celebrated the Department of Labor's decision to back off its proposal to allow employers to use certain workers' tips.

The updated law now allows that tips get shared among non-tipped workers, like cooks and dishwashers. But it doesn't cover managers or employers, and it applies only if all workers are paid the regular minimum wage of that region — not the lower hourly compensation paid to some tipped workers.

Now labor advocates are focused on a more familiar fight: Abolishing the tipped wage altogether. While the federal minimum wage has been inching up over the last few decades, the federal minimum wage for tipped workers has been frozen at $2.13 since 1996.

Some states have raised the tipped wage beyond that, but only seven states guarantee the same minimum wage to all workers.

All over the country, people are working on the One Fair Wage campaign.

New York Gov. Andrew Cuomo announced this year that he's holding hearings on eliminating the lower hourly wage for tipped workers. Michigan and Washington D.C. are also considering establishing one minimum wage for all workers.

"We haven't had this happening before," said Sylvia A. Allegretto, an economist and chair of the Center on Wage and Employment Dynamics at the University of California, Berkeley.

Cicely Simpson, executive vice president of the National Restaurant Association, said the tipped wage is a fair practice.

"Servers frequently make much more than the minimum wage based upon their level of service," Simpson said.

However, critics of the so-called two-tiered wage system argue that it exposes tipped workers to disproportionate levels of poverty and financial uncertainty.

While many people might think of a tipped worker in a high-end establishment, frequently picking up $20 bills at the end of a meal, the vast majority of restaurant workers are employed at larger chains, like Denny's and Applebee's, across the country.

Almost 13 percent of tipped workers are in poverty, compared with around 6 percent of non-tipped employees, according to a 2014 joint report by the Economic Policy Institute and the Center on Wage and Employment Dynamics at the University of California, Berkeley.

These problems are likely to be exacerbated by the fact that more workers will be making their living in restaurants. While employment in the private sector grew by 33 percent from 1990 to 2016, the number of full service restaurant workers doubled, according to Allegretto.

The Department of Labor projects food and beverage related jobs to grow by 14 percent from 2016 to 2026, faster than the average for all occupations.

"These jobs are becoming more plentiful, they're becoming a bigger part of our total economy," Allegretto said. "We have to take a hard look at bringing up not just the pay, but the quality of these jobs."

When your paycheck is a question mark

Erik Gullbeg, a waiter in New York City
Source: Erik Gullbeg

Unlike most other employees, what tipped workers take home from one week to the next can vary dramatically, based on factors outside of their control. That includes the weather, or whether their boss schedules them during the slow or busy shifts.

"That shift where you're raking it in, when combined with other shifts where you're struggling to make it, mean that you have irregular and unpredictable earnings," said Heidi Shierholz, senior economist at the Economic Policy Institute.

All workers receive around $16 an hour, compared with just about $10 an hour for tipped workers, according to the report by Economic Policy Institute and the Center on Wage and Employment Dynamics at the University of California, Berkeley.

"I can never be sure what my paycheck is going to be at the end of the week," said Erik Gullberg, a waiter and bartender at a restaurant in the East Village section of Manhattan in New York City.

"One bad Saturday night can throw off the whole week and I basically know I'm only eating at the restaurant."

'Well then go find another place to work'

Tracy Brasseur in her work uniform
Source: Tracy Brasseur

Under federal law, workers who are paid the tipped wage must end up with at least the minimum wage after tips.

However, advocates and workers say this often doesn't happen.

"If you don't make enough in tips it's an awkward situation for the employee to go the employer and say, 'I'm not getting the full minimum wage. I need you to follow the law'," said Shierholz, at the Economic Policy Institute.

The Department of Labor's wage and hour division found that between 2010 and 2012, more than 80 percent of the full-service restaurants it investigated had some type of violation.

Even for workers who do confront their bosses, problems remain.

"They're not receptive at all," said Brasseur, the waitress in Michigan, speaking about confrontations she's had throughout the decades she's waited tables.

"I've had bosses go ahead and say, 'Well then go find another place to work." Another line she's heard: "We're not making much money either."

Living without a safety net

Kirsti Esch, who's been a waitress in New York City for five years
Source: Kirsti Esch

"Being able to take care of yourself and use benefits is impossible if you're relying on tips," said Saru Jayaraman, president of the Restaurant Opportunities Centers United, a worker advocacy group.

Although about 70 percent of the overall private workforce is offered health insurance, just 30 percent of food and service workers are, according to the EPI report. Around 64 percent of those private-sector workers receive retirement benefits, compared with just 27 percent of food and service workers.

"The idea of retirement is entirely foreign to me," said Gullberg, the waiter in New York City. "Everyone in the restaurant industry lives paycheck to paycheck."

Just 23 percent of food service workers are compensated if they're too ill to work.

Kirsti Esch, a waitress in New York City, says she can't afford to take a day off, even if she is ill.

"I can't remember the last time I've actually taken a sick day," said Esch, 29. "You have to go in."

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