The Case for Eliminating the Tipped Minimum Wage in Washington, D.C.

by Restaurant Opportunities Center United
by National Employment Law Project

Executive Summary

As the Fight for $15 builds momentum from coast to coast, Washington D.C. residents are calling for the District of Columbia to join New York and California, and close to a dozen other cities, that have already raised their minimum wage to $15 per hour.1 In response, Mayor Muriel Bowser and members of the Council of the District of Columbia have proposed legislation to raise D.C.’s wage floor to $15 and increase the subminimum tipped wage to 50 percent of the full minimum wage.2

While an improvement compared to current law, the Mayor’s proposal would nonetheless leave behind a significant number of low-wage workers—namely, the nearly 29,000 workers in D.C. that work in predominantly tipped occupations. Restaurant workers account for the overwhelming majority of workers in this group and they include, for example, servers, bartenders, and food delivery workers.3 Other workers in primarily tipped occupations in D.C. include, among others, hairdressers, nail salon workers, massage therapists, and baggage porters.4 Under the current law, employers can pay these workers just $2.77 per hour, as long as tips cover the difference between the regular minimum wage and the subminimum tipped wage (the “tipped minimum wage”).5

This report analyzes the impact of maintaining a lower minimum wage for tipped workers and draws from the experience of other cities that have abolished the tipped minimum wage. It finds that:

  • The outmoded tipped minimum wage promotes poverty wages and unstable incomes for a tipped workforce that is majority-female across the country and disproportionately non-white in D.C.6 Contrary to industry claims that most tipped servers earn high incomes, the Bureau of Labor Statistics (BLS) reports that the median wage for tipped restaurant servers in Washington D.C. (classified as “Waiters and Waitresses” by the BLS), was just $9.58 per hour, including tips, between 2012 and 2015.7 This median wage was just a little higher than D.C.’s minimum wage during that period—the minimum wage increased from $8.25 to $9.50 between 2012 and 2015.8 It is also almost one dollar less than D.C.’s current minimum wage of $10.50 per hour.9
  • While a small number of tipped workers are employed at high-end restaurants where they earn significant amounts in tips resulting in higher incomes, high-earning servers are a small minority and not representative of tipped workers in D.C.10
  • D.C.’s tipped workers experience poverty at nearly twice the rate of all D.C. workers.11 And like tipped workers across the country, they must work for widely fluctuating incomes12 under the tipped minimum wage system, which leaves them and their families economically vulnerable.
  • Tipped workers are disproportionately people of color in D.C.,13 and women feel the impact of the tipped minimum wage most acutely— female tipped workers are twice as likely to live in poverty as male tipped workers in D.C.14
  • With a base wage of $2.77 per hour, tipped workers in practice depend entirely on tips for their income. This forces servers to tolerate inappropriate behavior from customers in order to make a living and also forces them to subject themselves to objectification that makes them vulnerable to co-worker and management harassment. Workers in states with a tipped minimum wage, such as D.C., are twice as likely to experience sexual harassment as workers in states that do not have a lower tipped minimum wage.15 Over ninety percent of restaurant workers in D.C. report sexually harassing behavior in their workplace.16
  • The nation’s top wage enforcement experts at the U.S. Department of Labor report that the complex tipped wage system—whereby employers are required to monitor employee wages and tips so that they can make up the difference between an employee’s earnings and the full minimum wage if tips fall short—is so complicated that it is difficult to enforce and results in high rates of noncompliance by employers. 17
  • Recognition of the harms and pitfalls resulting from a tipped minimum wage has led to a growing movement to abolish it. Two federal bills to raise the minimum wage would also eliminate the tipped minimum wage.18 Leaders who support eliminating the tipped minimum wage include President Barack Obama,19 Secretary Hillary Clinton,20 Senator Bernie Sanders,21 and over two hundred members of Congress, including D.C. Congresswoman Eleanor Holmes Norton.22
  • The restaurant industry is strong in the seven states with no tipped minimum wage, demonstrating that it is economically feasible to phase out the tipped minimum wage without harming restaurant jobs or sales.23 The National Restaurant Association’s (NRA) own data show relatively high rates of restaurant industry employment and sales growth in states that do not permit a lower tipped minimum wage compared with states that permit it.24
  • Cities like San Francisco and Seattle, which are both raising their minimum wage to $15.00 and do not allow a tipped minimum wage, have strong restaurant industries with growing employment.25 This robust growth has occurred without a tip credit and while raising wages by 30 percent in San Francisco and by over 53 percent in Seattle since 2004.26
  • Contrary to opponents’ predictions, raising the minimum wage to $15.00 and prohibiting a lower tipped minimum wage has not led restaurants to abolish tipping and has not led diners to reduce tipping levels. A small number of high-end restaurants are experimenting with getting rid of tipping, but these experiments are in their infancy, and overall tipping rates are the same, if not higher, in the seven states with no tipped minimum wage. Tipping rates in San Francisco27 and Alaska are among the highest in the country, despite the fact that these jurisdictions have no tipped minimum wage.28
  • Waiters and bartenders earn about 20 percent more in wages in states where tipped workers must be paid the full minimum wage before tips than in states that allow employers to pay only the federal $2.13 tipped minimum wage.29 In Seattle, bartenders at the ninetieth percentile of earnings earn 29 percent more than the same bartenders in D.C., while in San Francisco, top-earning bartenders take home 43 percent more in earnings than top-earning bartenders in D.C.30

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Endnotes

  1. Raise the Minimum Wage, $15 Laws & Current Campaigns, http://raisetheminimumwage.org/pages/15-Laws-Current-Campaigns (last viewed May 13, 2016).
  2. B21-0712 – Fair Shot Minimum Wage Amendment Act of 2016, available at http://lims.dccouncil.us/Legislation/B21-0712?FromSearchResults=true.
  3. Tipped restaurant workers account for over 80 percent of the tipped workforce in D.C., and servers and bartenders, alone, account for 47.5 percent of all D.C. tipped workers. See note 49, infra.
  4. Bureau of Labor Statistics, May 2015 State Occupational Employment and Wage Estimates, District of Columbia, available at http://www.bls.gov/oes/current/oes_dc.htm. This report considers the following BLS occupations “customarily tipped occupations”: Massage Therapists; Bartenders; Counter Attendants, Cafeteria, Food Concession, and Coffee Shop workers; Waiters and Waitresses; Hosts and Hostesses, Restaurant, Lounge, and Coffee Shop; Food servers, Nonrestaurant; Dining Room and Cafeteria Attendants and Bartender Helpers; Gaming Service Workers; Barbers; Hairdressers, Hairstylists, and Cosmetologists; Miscellaneous Personal Appearance Workers (including Manicurists and Pedicurists; Shampoos; Makeup Artists, Theatrical and Performance; and Skincare Specialists); Baggage Porters and Bellhops; Concierges; Taxi Drivers and Chauffeurs; and Parking Lot Attendants.
  5. District of Columbia Department of Employment Services, Office of Wage and Hour, District of Columbia Minimum Wage Increase, available at http://does.dc.gov/sites/default/files/dc/sites/does/page_content/attachments/DC%20Minimum%20Wage%20Increase%20-%20DC%20Register%20Public%20Notice.pdf.
  6. American Community Survey, 2010–2014 merged-five year sample. Calculations by the Restaurant Opportunities Centers United (ROC-United), examining data for individuals employed in customarily tipped occupations (see note 4 for a list of “customarily tipped occupations”), or other occupations, as noted, living in Washington, D.C., based on Ruggles et al., Integrated Public Use Microdata Series: Version 5.0 [Machine-readable database]. Minneapolis: Minnesota Population Center, 2010.
  7. Bureau of Labor Statistics, May 2015 State Occupational Employment and Wage Estimates, District of Columbia, available at http://www.bls.gov/oes/current/oes_dc.htm. The BLS May 2015 estimates are based on responses from six semiannual panels collected over a 3-year period: May 2015, November 2014, May 2014, November 2013, May 2013, and November 2012. Bureau of Labor Statistics, Occupational Employment Statistics, Technical Notes for May 2015 OES Estimates, http://www.bls.gov/oes/current/oes_tec.htm (last viewed May 13, 2016). Because these data were collected over a period of three years (November 2012 to May 2015), median earnings may be lower than the applicable 2015 minimum wage.
  8. See D.C. Code Ann. § 32-1003 (effective March 11, 2014); D.C. Code Ann. § 32-1003 (effective March 20, 2008 to March 10, 2014).
  9. District of Columbia Department of Employment Services, Office of Wage and Hour, District of Columbia Minimum Wage Increase, available at http://does.dc.gov/sites/default/files/dc/sites/does/page_content/attachments/DC%20Minimum%20Wage%20Increase%20-%20DC%20Register%20Public%20Notice.pdf.
  10. Even D.C. restaurant servers (classified as “Waiters and Waitresses” by the BLS) earning at the seventy-fifth percentile in terms of hourly wages earn only $11.59 per hour. Those earning at the ninetieth percentile in terms of hourly wages earn $20.78 per hour. See Bureau of Labor Statistics, May 2015 State Occupational Employment and Wage Estimates, District of Columbia, available at http://www.bls.gov/oes/current/oes_dc.htm. A single worker with no children working full-time in D.C. needs to earn at least $20 per hour to make ends meet; a single worker with one child will require more than $37 per hour working full-time to make ends meet. See Economic Policy Institute, Family Budget Calculator, http://www.epi.org/resources/budget/ (last viewed May 21, 2016). Thus, even servers earning at the ninetieth percentile in D.C. are barely making ends meet.
  11. See supra note 6.
  12. Sylvia A. Allegretto & David Cooper, Economic Policy Institute and University of California, Berkeley, Center on Wage and Employment Dynamics, Twenty-three Years and Still Waiting for Change: Why It’s Time to Give Tipped Workers the Regular Minimum Wage (July 2015) at 19, available at http://www.epi.org/files/2014/EPI-CWED-BP379.pdf (hereinafter “Allegretto & Cooper (2014)”).
  13. See supra note 6.
  14. Id.
  15. Restaurant Opportunities Centers United, Forward Together, et al., The Glass Floor: Sexual Harassment in the Restaurant Industry (Oct. 2014) at 2, available at http://rocunited.org/wpcontent/uploads/2014/10/REPORT_The-Glass-Floor-Sexual-Harassment-in-the-RestaurantIndustry2.pdf.
  16. Restaurant Opportunities Centers United (ROC-United) gathered 25 surveys from tipped restaurant workers in Washington, D.C. examining their experiences with sexual behaviors in the workplace for this report to supplement the findings in ROC’s The Glass Floor report, see supra note 15, with data specific to D.C. The survey avoided the term sexual harassment, and instead asked about a range of behaviors experienced at work and how workers felt about those behaviors, and if they were bothered by these behaviors—the technical definition of sexual harassment, see supra note 15. To ensure validity of responses, workers were given a range of options to further rate these behaviors, including fun, normal, scary, or unwanted. These figures were combined with 26 surveys of tipped restaurant workers from Washington, D.C. in the original The Glass Floor data set, for a combined total of 51 tipped restaurant workers in D.C. All quotes are from the 25 surveys gathered for this report.
  17. National Economic Council et al., The Impact of Raising the Minimum Wage on Women and the Importance of Ensuring a Robust Tipped Minimum Wage (Mar. 2014), available at http://www.whitehouse.gov/sites/default/files/docs/20140325minimumwageandwomenreportfinal.pdf.
  18. Raise the Wage Act, H.R.2150; S.1150, 114th Congress (2015–2016); Pay Workers a Living Wage Act, H.R. 3164; S.1832, 114th Congress (2015–2016).
  19. See Tim Devaney, “Top Dems line up behind $12 minimum wage,” Apr. 30, 2015, The Hill, available at http://thehill.com/regulation/labor/240702-obama-administration-backing-12-minimum-wage (noting that the Obama administration supports the Raise the Wage Act).
  20. Daniel Marans, “Hillary Clinton Takes a Stand Against ‘Subminimum Wage’ for People with Disabilities,” Mar. 29, 2016, The Huffington Post, available at http://www.huffingtonpost.com/entry/hillary-clinton-subminimum-wage-people-with-disabilities_us_56faf630e4b083f5c605ef20 (noting that Hillary Clinton supports eliminating the tipped minimum wage).
  21. Bernie 2016, Sanders Statement on New York and California Minimum Wage Increase, Apr. 4, 2016, available at https://berniesanders.com/sanders-statement-new-york-californiaminimum-wage-increase/.
  22. See Raise the Wage Act, H.R.2150; S.1150, 114th Congress (2015–2016); Pay Workers a Living Wage Act, H.R. 3164; S.1832, 114th Congress (2015–2016).
  23. See discussion in Parts 7 and 8, infra.
  24. Id.
  25. Bureau of Labor Statistics, Quarterly Census of Employment and Wages, 2001–2014. Restaurant Opportunities Centers United analysis of employment and number of establishments reports for NAICS 722 Food Services and Drinking Places in King County, WA, San Francisco County, CA, and Washington, D.C., available at http://data.bls.gov/cgi-bin/srgate.
  26. Restaurant Opportunities Centers United analysis of increases to the minimum wage for tipped workers in Washington, D.C., Seattle, and San Francisco, from 2004–2015. Seattle wage rates accessed at Washington State Department of Labor & Industries, History of Washington Minimum Wage, http://www.lni.wa.gov/workplacerights/wages/minimum/history/default.asp and Office of the Mayor, $15 Minimum Wage Schedules, http://murray.seattle.gov/minimumwage/. San Francisco wage rates accessed at City and County of San Francisco, Office of Labor Standards Enforcement, Minimum Wage Ordinance, http://sfgov.org/olse/minimum-wage-ordinance-mwo, Washington, D.C. wage rates accessed at United States, DOL, Wage and Hour Division, Minimum Wages for Tipped Employees – Historical Tables, https://www.dol.gov/whd/state/tippedHistory.htm. .
  27. According to the Golden Gate Restaurant Association, “[d]iners in San Francisco reported an average 19% tip rate.” Samantha Higgins, Golden Gate Restaurant Association, The State of the Industry: An Update from GGRA’s Executive Director (Apr. 2016), available at http://ggra.org/the-state-of-the-industry-an-update-from-ggras-executive-director/. A 19 percent tip rate exceeds even the highest state tip rate of 17 percent in Alaska. Roberto A. Ferdman, “Which US states tip the most (and least), as shown by millions of Square transactions,” March 21, 2014, Quartz, available at http://qz.com/189458/the-united-states-of-tipping/.
  28. Roberto A. Ferdman, “Which US states tip the most (and least), as shown by millions of Square transactions,” March 21, 2014, Quartz, available at http://qz.com/189458/the-unitedstates-of-tipping/.
  29. Allegretto & Cooper (2014) at 11.
  30. See Figure 8, infra.
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