With a Tipped Wage, Customers Are Stuck Picking Up the Tab

tipped wage unfair

I have written before about tip crediting and how I wish more politicians—specifically, those who are running for, you know, President—would come out against it. At the time, I noted that it’s a policy which fosters the race and gender income gap by disproportionately impacting women, which remains true.

What I did not mention—because, I don’t know, it didn’t seem to bear repeating—was that it’s also actually just kind of mind-boggling that anyone would argue in favor of a wage of just shy of three American dollars per hour in a place like Washington, DC, where the tipped wage is $2.77 and the minimum wage is $10.50.

For a full-time worker, that’s a paycheck of a scant $443.20 per month.

$443.20.

Per.

Month.

Of course, the assumption with the tipped wage is that a server is probably making the $7.73 in tips she’d need to to round herself up to $10.50 (if not, her employer is required to float the rest although anyone who’s looked into this in even a cursory manner could tell you that often doesn’t happen).

Again, let’s look closely at that:

  • Base wage: $2.77 per hour
  • Required tipped income to make minimum wage: $7.73 per hour
  • Total base wages required to be paid by employer:  $22.16
  • Total required tips to even make minimum wage per eight-hour shift: $61.84

Which means a) as a patron in Washington DC you’re expected to float restaurant owners to the tune of 73.6% of their employee payroll costs, and b) as a server, your actual base wage is less important than the amount of money you can pull from a customer’s wallet.

If this is surprising to you, you’re not alone; D.C. Mayor Muriel E. Bowser has recently proposed a change to the area’s minimum wage laws, which would raise the base minimum wage to $15 over several years, and gradually increase the tipped wage from $2.77 to $7.50 over the next six years.

DC has been gradually increasing its base wage, but not its tipped wage, since 2013.

In the previous times I’ve written about this subject, I didn’t feel the need to go into too deep of detail on what the sub-minimum wage actually looks like and how truly bonkers it is, because I assumed (wrongly) that most people can see what a clearly ineffective system this is—a system which allows restaurants to charge whatever they like, keep most of the money because they’re not paying it in payroll costs, and expect customers to cover the bulk of the costs not only by paying their tab but by tipping their server.

Forgetting the fact that tipping’s history is racist as hell, this seems antithetical to what we typically think of as the point of tipping. Tipping is meant to be for a job well done, not so that a server isn’t making what is very obviously an unlivable wage.

Whether or not you believe in abolishing tipping, balancing the budget on the backs of tips—essentially relying on the kindness of restaurant patrons—seems like a poor way to do business.

And yet, there are people who will fight tooth and nail to convince you that this is a system that works. Like this guy from a fake think-tank, who recently wrote a piece in the Washington Post going to bat for the tipped wage in DC. Here’s what he had to say:

In reality, those take-home wages for tipped employees are many times larger than the required hourly minimum. In testimony before the D.C. Council, restaurateurs in the District reported that their employees earned anywhere from $20 to $35 an hour when tips were included. (If a server sells $100 in food, he typically gets an 18 percent to 20 percent tip; the restaurant may make 5 percent profit on a $100 meal.)

Of course restauranteurs would testify that their servers are raking it in with their tips. They’re literally financially incentivized to say that.

This particular fellow goes on to note that increasing the tipped wage from $2.77 to $7.50 (because that’s the proposal on the table) “threatens [DC’s] vibrant foodie culture”:

It’s easy to forget during a bustling Friday night, but the average profit margin at a full-service restaurant is in the low single digits. Labor costs make up about one-third of restaurant expenses. Nearly tripling the hourly wage for tipped employees would force dramatic changes in service, food prices and employment levels.

This is uncomfortable, I know, but stick with me:

Restaurant owners are actually not entitled to turn a profit.

There! I said it! Turning a profit as a restaurant owner is not something that is required by law. No one owes you a profitable business—and if paying just a quarter of your servers’ total salaries is what’s holding your business together and expecting patrons to literally pick up the tab on the rest, maybe your business model sucks.

What is required by law is that workers who do work are entitled to be paid for that work, and the current law is only barely requiring employers to do that. If they make 18% off a $100 tab, bully for them. That’s great. However, there are plenty of DC servers who are decidedly not working in restaurants where the tabs are routinely $100.

According to a 2015 report from PayScale, the median income for a server is about $13.80 per hour; over 60% of their income is from tips, which means they actually only earn about $8.50 in tips per hour on average.

The funny thing about averages is that they indicate that a whooooole lot of people are well below that figure.

Additionally, it’s important to note that $13.80 is only barely above the city’s actual minimum wage, and that $8.50 per hour in tips is only a hair over what is required by a server to essentially break even.

And yet, restaurant owners and anti-wage lobbyists insist that this is a fine system, that this works, and that it’s perfectly acceptable to require servers, bussers, bartenders, and other tipped workers to not only sing for their supper, but sing exceptionally, lest they barely be paid at all.

When you leave a tip, you expect that it’s an extra bonus for your server because they delivered a service well. With the tipped wage, though, you’re actually just paying their salary on behalf of their boss, who get to collect the money from the tab and from the cost-savings of not paying their employees.

And they expect you, as a customer, to be happy about it.

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Hanna Brooks Olsen
Hanna Brooks Olsen is a reporter in Seattle. Her writing about the economy and politics has appeared in the Atlantic, the Nation, Salon, Fast Company, and elsewhere.