Ending the $2.13/Hour Tipped Minimum Wage Will Narrow the Latino Pay Gap

By Ricky Garza, Communications Coordinator, NCLR

Photo: Torbakhopper
Photo: Torbakhopper

While cities across the country are fighting for increases in the minimum wage, thousands of servers are stuck earning the shockingly low federal tipped minimum wage of $2.13 an hour. Unlike the standard minimum wage of $7.25, the tipped minimum wage has remained unchanged for 23 years, forcing workers to rely on tips for the majority of their income.

For these workers, who are disproportionately Latino, $2.13 per hour plus tips is rarely enough to make ends meet.

In a recent National Journal piece, tip work and insufficient pay are a fact of life for Jimmie Luthuli, a tipped worker earning $2.77 in Washington, DC. Though federal law says tipped workers earning less than the standard minimum wage after tips must be paid the difference—called the tip credit—Jimmie Luthuli often makes far less. According to the Economic Policy Institute, 83.8 percent of full-service restaurants surveyed by the Department of Labor violated tip credit provisions.

Fortunately, some states have countered such labor violations by revising their minimum wage laws for tipped workers. In eight states around the country, the tipped minimum wage has been abolished in favor of a single minimum wage for all workers, tipped or otherwise. According to a new study from the National Women’s Law Center, these states have made progress in closing the pay gap between Latina workers and White men and reducing poverty rates between men and women.

In states that maintain separate tipped and standard minimum wages, the pay gap is larger. For these states, Latinas working full-time earn $0.51 on every White male worker’s dollar, a wage gap of $0.49. For Latinas working in states with a single minimum wage for all works, the pay gap falls slightly to $0.47. Although the decrease is small, the study underscores the fact that minimum wage policies have real implications for reducing racial pay disparities.

Beyond this, the report also found female tipped minimum wage workers in states without a separate tipped minimum wage have poverty rates 33 percent lower than in states with tipped minimum wages of $2.13 an hour. While women still had higher poverty rates than men in all states, ending the tipped minimum wage made a significant difference in lowering these rates.

The tipped minimum wage should end and be replaced with a strong living wage applicable to all workers. Policymakers from city halls to statehouses to Congress should ensure no one working full-time is forced to live in poverty. For Latino families, raising the minimum wage for all workers would represent a significant step in the fight against poverty and the persistent racial wealth gap. It’s time to end the unconscionably low tipped minimum wage and give all workers the robust living wage they deserve.

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