Employers in MA Can Pay Tipped Workers Just $2.63/hr

Bylaw, employers may pay a lower hourlywage to certain workers whoregularly earn tips – as long as those tips bring the tipped workers’pay up to the level of the regular minimum wage (otherwise, theemployer must make up any difference). For decades, up through themid-1990s, employers were required to pay tipped workers 60 percent ofthe regular minimum wage. In 1996, that fixed percentage was reduced to50 percent and in 1997 the amount employers are required to pay tippedworkers was set at $2.63 per hour. Despite several increases in theregular minimum wage, the tipped minimum’s value has not been increasedsince. Today, the tipped minimum in Massachusetts has declined to justone third the value of the state’s regular minimum wage. (For moredetails see MassBudget’s factsheet TheDeclining Value of the TippedMinimum in Massachusetts.)

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Many tippedworkers must make ends meet on very low incomes (inaddition to other job-related challenges many tipped workers face, suchas unreliable and unpredictable hours).1 Nationally, poverty rates among tipped workers are more thandouble the rates for all workers.2However, states with the highest tipped minimum wages have much lowerpoverty rates among their tipped workers than states with the lowesttipped minimums (12.1 percent vs. 16.1 percent, respectively).3Notably,tipped workers are overwhelmingly female and above 20 years in age.4(For more details about tipped workers, see MassBudget’sfactsheet TheMinimum Wage for Tipped Workers.)

Currently, eight states requireemployers to pay tipped workers the full minimum wageamount.5In Massachusetts – with thelowest tipped minimum wage of any state in New England6– Legislators now are considering three proposals forincreasing thestate’s minimum wage, including the tipped minimum wage. None of theproposals suggests requiring employers to pay tipped workers the fullminimum wage, but one would require that they pay half the minimum wageamount and another would restore the requirement that they pay 60% ofthe full minimum (before counting tips – see chart, below). Thesereforms could result in meaningful income gains for many of the roughly100,000 tipped workers in the Commonwealth.

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Notably,careful studies by leading economists (of both long-run andcurrent data) show that higher tipped and higher regular minimum wageshave little or no effect on employment in the relevant jobsectors.7  Similarly, the National Restaurant Associationitself projects little difference in food service job growth amongstates with high, medium and low tipped minimums over the comingdecade.8  (For more discussion of the effect of the tippedminimum on employment, see MassBudget’s factsheet JobGrowth Unrelatedto States’ Tipped Minimum Wage.)

1National Employment Law Project, Tipped Workers Factsheet:http://raisetheminimumwage.org/pages/tipped-workers

2MassBudget, The Declining Value of the Tipped Minimum Wagein Massachusetts, June 2013:http://www.massbudget.org/report_window.php?loc=tipped_minimum_wage.html

3MassBudget, The Minimum Wage for Tipped Workers, Nov. 2013:http://www.massbudget.org/report_window.php?loc=tipped_one_pager.html

4Ibid

5MassBudget, The Declining Value of the Tipped Minimum Wage inMassachusetts, June 2013 (Hawaii, the eighth state, enacted suchlegislation in April, 2014):http://www.massbudget.org/report_window.php?loc=tipped_minimum_wage.html

6MassBudget, The Declining Value of the Tipped Minimum Wage inMassachusetts, June 2013:http://www.massbudget.org/report_window.php?loc=tipped_minimum_wage.html

7For example, see Allegretto, Sylvia, University of California,Berkeley, Institute for Research on Labor and Employment, Working PaperSeries, “Waiting for Change”, December 2013:http://irle.berkeley.edu/workingpapers/155-13.pdf

8MassBudget, Job Growth Unrelated to States’ Tipped MinimumWage, Feb. 2104:http://www.massbudget.org/report_window.php?loc=tipped_minimum_jobs.html

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