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Another Voice: It's time to eliminate the tip credit

By Genevieve Rados

On Tuesday, the New York Commissioner of Labor held a hearing in Buffalo on whether New York should eliminate the “tip credit,” which allows employers to pay tipped workers a lower minimum wage if they make up the difference in tips. In New York, tipped workers only make $7.50 per hour. The regular minimum wage in upstate New York is $10.40, which still only amounts to about $21,500 per year for full-time workers.

The tip credit system is rife with problems. Although employers are legally required to make sure that tipped workers make at least the full minimum wage including tips, enforcement is so lax that wage theft has reached epidemic levels. A recent study in Buffalo found that 24 percent of tipped workers report that their employers take some of their tips, a violation of state law. Female servers must put up with pervasive sexual harassment, and black servers receive fewer tips than white servers.

The employer benefits from this system: He or she gets to pay the server less, and some servers may not mind. But a server who has to put up with sexual harassment in exchange for tips, or one too scared to confront an employer about wage theft, is getting a bad deal. So are the rest of us. We are subsidizing restaurant owners, allowing them to pay their workers less by expecting us to bring their pay up to the minimum wage with our tips. We also subsidize restaurant owners through our taxes: 46 percent of tipped workers nationwide rely on government benefits.

Restaurant owners argue that eliminating the tip credit would destroy the restaurant industry. Some servers fear that customers would stop tipping. But seven states, including conservative states likes Montana and Alaska and big states like California, have gotten rid of the tip credit. In these states, tipped workers make more than states with the tip credit and employment in the restaurant industry has continued to rise. No tip credit doesn’t mean no tips; it just means tipped workers make the regular minimum wage as their base pay.

Servers are the lifeblood of the restaurant industry, and we all know how servers can make a dining experience great. As one server explains, “We dedicate ourselves to your entire dining experience: we are inventory takers, nannies, mathematicians, and sometimes we even cut your dad’s food for him because you’re busy with something else and we have hearts and care about people.”

As Gov. Andrew M. Cuomo considers eliminating the tip credit, we should think about how the current system treats our hard-working servers. With wage theft, sexual harassment, and the difficulty many tipped workers have making a living, it is time to eliminate the tip credit and guarantee all servers at least the minimum wage.

Genevieve Rados is the Frank Dolce Fellow at the Western New York Council on Occupational Safety and Health.

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