Revolutionizing Fair Wages: Five States Pave the Way for Full Minimum Wages for Tip Earners in 2024!

Currently, just seven states forbid “subminimum” compensation for tipped employees, such as servers at restaurants and bartenders, but advocates believe 2024 will be a good year to raise that number to as many as 20.

This year, five states will decide whether to stop rewarding tipping employees who make less than the minimum wage. Additionally, campaigners claim that by portraying it as a crucial cost-of-living issue in an election year, they are spreading that struggle to at least as many other people.

Hourly workers who receive tips, such as servers and bartenders, are paid a lower “subminimum” wage than their nontipped counterparts. Long-standing two-tiered pay system would be eliminated by ballot measures pending in Michigan, Arizona, Ohio, and Massachusetts, as well as a bill being reintroduced in Connecticut.

There are now only seven states with a single minimum wage that does not include tips. Even though over twenty-one states have boosted tip earners’ subminimum pay over the federal $2.13 per hour level (which was last raised in 1991), the base pay of these workers remains lower than the minimum wage in their respective states.

When tips fall short of the federal minimum wage of $7.25 per hour, employers are expected to make up the difference; however, labor organizations and studies assert that this is not always the case.

New York, where a $15 hourly minimum wage went into force on January 1st, with the exception of tip earners, is among the next major battlegrounds. Progressive lawmakers and activists are already pressing to remove this loophole, and they are urging Democratic Governor Kathy Hochul to support a single wage floor in her budget proposal for 2024.

Following Chicago lawmakers’ vote in October to start phasing out the tipped subminimum wage over five years until it’s equal to the city’s normal hourly minimum of $15.80, supporters are feeling quite optimistic. Less than a year prior, voters in Washington, D.C. approved a ballot initiative by large percentages, taking a similar action.

The vote by Chicago lawmakers in October to phase away the tipped subminimum wage over five years, until it is equal to the city’s statutory hourly minimum of $15.80, has given supporters a boost in their step. A ballot initiative that was overwhelmingly supported by voters in Washington, D.C. less than a year prior took a similar turn.

The national advocacy group One Fair Wage, which spearheaded the effort in the Windy City, has Saru Jayaraman, its president, saying, “We’re just seeing so much momentum following that win.” According to her, the organization has already witnessed thousands of restaurants across willingly give up subminimum salaries in favor of paying all front- and back-of-house employees the same base salary plus gratuities.

Saru Jayaraman, president of One Fair Wage, a national advocacy group that spearheaded the fight in the Windy City, said, “We’re just seeing so much momentum following that win.” According to her, many of restaurants nationwide have already chosen to forgo subminimum pay in favor of paying all front- and back-of-house employees the same base pay plus gratuities.

“It concerns a significant change that has occurred in the restaurant sector since the pandemic,” explained Jayaraman, who is also in charge of the Food Labor Research Center at UC Berkeley.

Even while Americans went along and added gratuities in more places more frequently, they still complained about it. Tipping numbers increased somewhat as the nation recovered from the pandemic. But as automated prompts from digital card readers have become more common, problems with tipping etiquette have recently solidified into weariness.

Even after they went along and added gratuity in more places more frequently, Americans still complained about the slight increase in tipping volumes as the nation recovered from the pandemic. But lately, weariness has solidified from issues with tipping customs that were confused by the frequent automatic alerts from digital card readers.

In November, Square, a payment processor, told NBC News that while tipping has increased slightly over the past several years, the increases have been “much more modest than people realize.”

Groups representing the restaurant industry oppose the elimination of subminimum pay for tipped employees, arguing that the practice is essential for smaller businesses that operate on extremely low profit margins. Many companies claim that if this weren’t the case, they would have to pass additional labor costs through to customers in the form of higher menu prices or ambiguous service fees that end up getting added to customers’ checks. Some argue that offering a large gratuity is the best way to encourage excellent service.

Restaurant industry associations are among those who oppose doing away with subminimum wage for tipped employees, arguing that the practice is essential for smaller businesses that operate on extremely low profit margins. If not, a lot of companies claim they would have to pass on increased labor expenses to customers in the form of higher menu pricing or ambiguous service fees that appear on customers’ bills. Some contend that offering the possibility of a large tip is the best way to reward excellent service.

The practice is vital for smaller businesses with extremely narrow profit margins, according to groups opposed to doing away with subminimum pay for tipped employees, which includes the restaurant industry. Without it, a lot of companies claim they would have to impose greater labor costs on customers in the form of more expensive menu items or ambiguous service fees that appear on their checks. Certain individuals feel that offering a substantial gratuity is the best way to encourage excellent service.

“If California has a minimum wage of $16 and no subminimum wage, then why are there restaurants in the state?” Allegretto, a former co-chair of the Institute for Research on Labor and Employment at UC Berkeley, stated.

“If there’s no subminimum wage and a minimum wage of $16 in California, why are there restaurants there?” the former co-chair of the Institute for Research on Labor and Employment at UC Berkeley, Allegretto, stated.

One Fair Wage seeks to win higher pay floors generally in addition to merely doing away with subminimum pay for potentially millions more tipped workers in 2024 (an election year in which Jayaraman stated the cost of living is a “top issue for every poll I’ve seen”).

In 2024, an election year when Jayaraman stated that the cost of living is a “top issue for every poll I’ve seen,” One Fair Wage seeks to secure higher pay floors generally in addition to simply doing away with subminimum pay for potentially millions more tipped workers.

“It’s just not working anymore to force these workers to rely solely on tips,” she continued.