Tipped Workers and the Minimum Wage: California's broad minimum-wage increases appear tailored to manage political forces.

Author:McKenzie, Richard B.

At the start of this year, California's mandated minimum wage for workers in firms with 26 or more employees rose from $11 to $12 an hour, after rising in 50

Proponents of minimum-wage increases have argued that the hikes are needed to provide low-income, low-skill workers in, say, fast-food restaurants a "living wage," meaning enough income to provide an acceptable living standard. Interestingly, though, the coming California wage increases will have an unheralded (and, some might say, perverse) effect: they will raise the paychecks of some well-off California restaurant servers who work in higher-end restaurants and whose total earnings, including hefty tips, are now well above the "living wage." Thus, minimum-wage policy is not particularly well targeted to the low-wage workers that it's ostensibly intended to help.

Minimum-wage coverage of already-well-off servers may be nothing more than an unintended consequence of the legislation, a simple policy mistake made by busy legislators. However, another explanation is that this policy is intended to dampen opposition from some affected industry sectors, as well as manage political forces.


Because California law, unlike federal law, does not allow a sub-minimum wage for tipped workers, restaurants must pay those workers the state's minimum wage regardless of how much they receive in tips. Tips are considered by law to be servers' "sole property" and many servers make significantly more income from tips than from their wages.

In the fall of 2015, the Restaurant Opportunities Centers United and other labor groups pressed for a ban on restaurant tipping on the grounds that it leads to unequal server incomes (because of, say, customers' racial and gender biases). Further, these groups argue, tipping forces servers to grovel for income and "tolerate inappropriate and degrading behavior from customers, co-workers and managers in order to make a living," to quote a labor activist writing in the New York Times. Tippingban advocates proposed to replace tips with a minimum hourly wage of $15.

As I previously described in these pages ("Should Restaurant Tipping Be Abolished?" Summer 2016), I interviewed 40 servers in eight Orange County, CA "casual" table-service restaurants, which I defined as serving alcoholic beverages and cheeseburger-and-fries meals for less than $12 (e.g., Chili's). All interviewed servers scoffed, without hesitation, at the idea of giving up their tips for a "mere" $15 minimum wage. I then asked what minimum wage they would accept in exchange for giving up tips plus the then$10 minimum wage. Their responses ranged from $18 to $50 an hour, with $30 being the median. (Several servers responded after consulting their smartphones, where they recorded their tips.) That median translates to slightly more than $33 an hour today, after adjusting for inflation on tip income and adding the $2 increase in the state's minimum wage since 2015.

Understandably, many servers said that if tips were banned and replaced with a $ 15-minimum wage, they'd leave their restaurant jobs for work that pays better. Most servers volunteered that their relatively high income inclusive of tips was the key inducement for serving. Several added that they were...

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