The Federal minimum wage for tipped employees The wage has been $2.13 per hour since 1991. At that point it was half the regular minimum wage of $4.25. But Congress has didn’t increase the tipped wage while recurrently raising the regular wage floor. Today, suggestions are lower than a 3rd of the total federal minimum wage of $7.25.
As of October 2024, 30 states and Washington, DCThey had introduced their very own, higher, regular minimum wages. The variety of states taking this step continues to extend, partly due to Congress has not increased the federal minimum wage since 2009. Over the years, many states have also done this instituted higher wages for tipped staff. Seven states haven’t any tipped minimum wage in any respect, meaning employers must pay all employees, including those that earn suggestions, at the very least the state-mandated minimum wage.
If Massachusetts voters conform to one Ballot initiative on November 5, 2024your state will steadily increase the state minimum wage until it equals the state minimum wage. That means it is going to rise from $6.75 to $15 per hour by 2029.
Massachusetts can be Joining eight states that require it – or are on course to require the total minimum wage for tipped staff: Alaska, California, Minnesota, Montana, Nevada, Oregon, Washington and Michigan. Two major cities, Chicago and Washington, DC, even have similar measures on their books.
To inform the tipping debate, we – a Labor economist and a sociologist – analyzed the potential impact of adopting a full minimum wage on staff, businesses and consumers in Massachusetts. We found more Evidence of potential advantages as disadvantages.
Demographics of minimum tipped earners
For our study, we examined labor market data Bureau of Labor Statistics. We found that tipped staff are largely waiters, bartenders, hosts and bussers employed in bars and restaurants. They are likely to earn low wages. Most are women, they usually are disproportionately people of color.
In Massachusetts, tipped staff typically earn low wages: On average You take home $20.30 an hourincluding the ideas they receive. That's about two-thirds of the national average hourly wage of $31.50.
About 66% of the tipped workforce is women, in comparison with 49% of the state's total workforce. About 43% are people of color, in comparison with 29% of all staff in Massachusetts.
Teens also make up a disproportionate share of tipped staff in Massachusetts: 15%, in comparison with 4% of the broader workforce. But the overwhelming majority of tipped staff are at the very least 20 years old.
Arguments for and against
Proponents argue that the minimum wage must be abolished Increasing wages for tipped staff and higher be sure that staff should not exposed to wage theft. U.S. Senator Elizabeth Warren of Massachusetts would really like the federal government to take this step.
Opponents argue that the lower minimum wage must be abolished could backfire on tipped staff When their customers tip less regardless that they know that employers could have to pay their employees more suggestions – or some jobs will likely be lost. They also worry that the fee of doing business could rise and costs could rise. Massachusetts Governor Maura Healey, a Democrat, is against the measure.
In Arizona, voters solid their ballots for another person Ballot initiative That requires a unique form of tipped minimum wage reform. This calls for the state minimum wage to be set at 25% below the total minimum wage. If approved, Arizona would lower its minimum tipped wage is currently at $11.35 per hour to $10.76. Today, Arizona's tipped minimum wage is $3.00 lower than the state's full minimum wage of $14.35.
Vulnerable to wage theft
If a tipped worker's base wage plus suggestions doesn’t equal at the very least the state minimum wage, employers will likely be held liable is meant to make up for the shortfall. This makes these staff particularly prone to being underpaid, a type of wage theft.
The consequences of this vulnerability could be clearly seen in restaurants and hotels. The hospitality industry, which employs the best proportion of tipped staff, accounts for lower than 6% of the workforce in Massachusetts.
However, it almost makes a difference Employees filed 14% of all complaints with the Massachusetts Attorney General's Office in 2023, including a disproportionate variety of complaints about minimum wage violations, nonpayment of wages, and tip violations.
The hospitality industry also contributes to this over 36% of all enforcement actions – Investigations that exposed evidence of labor violations – found by the Massachusetts Attorney General's Office.
Impact on the result
Two Peer Review Economics Studies The study examined three a long time of information and located that tipped staff make measurably extra money when wage rates rise below the minimum wage.
Current wage rates we’re monitoring Bureau of Labor Statistics data support these findings.
For example, consider the typical hourly wage of $18.79 for tipped staff in states that treat tipped staff like other staff. This is 21.2% higher than the typical amount of $15.50 amongst tipped staff in states where the federal minimum wage of $2.13 stays in effect.
Only a part of this difference could be explained by the 15.7% difference in the typical wage of all staff in these different clusters of states.
What could occur to business costs?
Certainly, doubling the tip rate from $6.75 in Massachusetts to $15.00 might seem to be it could increase the fee of doing business. However, a number of aspects would soften the blow.
First, we calculated that the typical tipped restaurant employee in Massachusetts earns about $11.75 per hour, excluding suggestions. Increasing this rate to $15.00 represents a 28% increase – a much smaller increase than increasing the wage from $6.75 to $15.00. Additionally, increasing a employee's wage from $11.75 to $15.00 by 2029 represents a rise to $13.00 in today's dollars, or a ten% increase adjusted for projected inflation.
Second, as we explained in our study, these numbers suggest that the elimination of the tipped minimum wage would occur by 2029, since tipped staff make up about 30% of restaurant staff in Massachusetts and these firms' payrolls are within the Typically make up about 30% of their sales, increasing the prices of a median Massachusetts restaurant by 1%.
Employers may additionally give raises to another employeesalthough they should not obliged to accomplish that. This suggests that the fee increase is more prone to be around twice as high, i.e. 2% of sales.
Expected impact on prices and jobs
If the typical Massachusetts restaurant passed on all of its labor cost increases to the buyer through higher prices, that may mean restaurant prices would increase by about 2%.
This equates to a restaurant meal costing $50, up from $51 – probably a small price increase.
The two studies mentioned above, which examined a long time of information to find out whether tipped staff earned more, also examined whether firms in states that increased their tipped minimum wage cut more jobs than firms in states that didn’t where this was not the case.
Although each research teams examined principally the identical data, one study found evidence of more job losses and the opposite didn’t because they made different statistical decisions. These studies due to this fact didn’t provide conclusive results in regards to the impact of raising the minimum wage on employment.
There is way more research into whether increasing the regular minimum wage has led to significant job losses. Studies have found that when it has increased, employers have had to simply accept cost increases This is analogous to what we estimated would occur to employers in Massachusetts if the state eliminated its tipped minimum wage. And that Evidence suggests so no significant job losses.
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