A new analysis released Thursday by the National Women's Law Center found that in the eight "equal treatment" states where tipped workers are entitled to be paid the full federal minimum wage by their employers ($7.25), the wage gap between men and women is smaller, and poverty rates among tipped workers (particularly women) are lower than in states where tipped workers make a base wage of just $2.13 an hour. More specifically, the average wage gap is 17 percent smaller for women overall working full time; the average poverty rate for female tipped workers is 33 percent lower.
The analysis, which drew data from the Census Bureau's recent American Community Surveys, also emphasized that the situation is especially bad for people of color. In states with a tipped minimum wage of $2.13 per hour, African-American women working full time, year round are paid on average just 60 cents for every dollar earned by their white male counterparts (a wage gap of 40 cents). In "equal treatment states," the wage gap drops to 33 cents. Hispanic women fare worst of all, earning just 51 cents on the white male dollar in the former (wage gap: 49 cents) and 53 cents on the white male dollar in the latter (wage gap: 47 cents).
"What was striking to me was the variety of ways in which the inequality that's associated with the existence of this large tip credit manifests itself," said Katherine Gallagher Robbins, a senior policy analyst at NWLC and coauthor of the report. "We see repeatedly, no matter how you slice the data, workers in these states are doing worse." Her coauthor, NWLC's Julie Vogtman, said she was struck by extent to which the effects of a low cash wage for tipped workers "radiated out" to affect the wider wage gap in these states.
Industry groups have argued that the $2.13 base wage is a misnomer. Every tipped worker is guaranteed at least the minimum wage of their state, after all. And it's the employer's legal responsibility to make up the difference between the tipped minimum cash wage and the regular minimum wage, if a server's tips fall short. The trouble is, whether employers are deliberately dodging this requirement or are simply held back by logistics, many workers never see that money at all.
A recently released report from the Economic Policy Institute underscores the problem. In the most recent compliance sweep of full-service restaurants by the U.S. Labor Department's Wage and Hour Division, 83.8 percent of investigated restaurants had some type of violation. "In total, WHD recovered $56.8 million in back wages for nearly 82,000 workers and assessed $2.5 million in civil money penalties," the Labor Department reported. "Violations included 1,170 tip credit infractions that resulted in nearly $5.5 million in back wages."
The latest NWLC analysis comes as the Senate eyes a new vote on a minimum-wage bill that would increase the regular federal minimum wage from $7.25 to $10.10. The bill would also reestablish the link between the tipped and the regular minimum wages, raising the former to 70 percent of the latter within six years. Senate Majority Leader Harry Reid's office has been coy on timing, but people well sourced in the matter say the proposal could come up for a vote as soon as next week.