The poverty rate among waitstaff and bartenders is dramatically lower in states where tipped workers must be paid the regular minimum wage as a base wage than in states where restaurants can pay tipped workers a base wage less than the full minimum wage. Federal law permits restaurants to pay tipped workers a base wage of $2.13 per hour so long as the weekly total of their tips plus the base wage is the equivalent of a week’s salary at the minimum wage. If not, restaurants are supposed to make up the difference, although this requirement is difficult to enforce and there is considerable abuse.
In the states where restaurants are permitted to pay waitstaff and bartenders the federal tipped minimum wage of $2.13 per hour, 18 percent of these workers are in poverty—more than twice the rate of non-tipped workers in those states (7 percent).
Waitstaff and bartenders are less likely to be in poverty when they are paid the regular minimum wage: Poverty rates of non-tipped workers, and waiters and bartenders, by state tipped-minimum-wage level
|States with $2.13 tipped minimum wage||States with tipped minimum wage above $2.13 but below regular minimum wage||States where tipped workers get the regular minimum wage|
Source: Authors' analysis of Current Population Survey Annual Social and Economic Supplement microdata, 2010–2012
In the 25 states that require restaurants to pay waiters and bartenders more than $2.13 per hour, but less than the full minimum wage, 14.4 percent of waiters and bartenders are in poverty, versus 6 percent of non-tipped workers.
The poverty rate of waiters and bartenders is much lower in the seven states that require restaurants to pay waitstaff and bartenders the regular minimum wage regardless of tips: in these states, it is nearly 8 percentage points lower than in the $2.13 states and over 4 percentage points lower than in the states where tipped workers get more than $2.13 per hour but less than the regular minimum wage.
Because the poverty rates of non-tipped workers do not vary between the three groups of states, differences in tipped minimum wage policies are likely driving the substantially different poverty rates of waitstaff and bartenders.