Myth and Facts

The vast majority of restaurant workers in states with subminimum wages overwhelmingly support One Fair Wage - a policy advocating for a full minimum wage plus tips on top for tipped workers.

A 2019 poll of workers in Massachusetts, Mississippi, and Pennsylvania found that workers strongly believe everyone who works should earn a living wage.(1) In 2020, over 140,000 workers nationwide signed the One Fair Wage petition calling for an end to the tipped subminimum wage. The COVID-19 pandemic further highlighted the need for change, with nearly 70% of workers reporting significant declines in tips and increased health risks. The subminimum wage, rooted in a legacy of slavery, disproportionately affects women and people of color, contributing to higher poverty and sexual harassment rates. Evidence from seven states that have implemented One Fair Wage shows that it leads to lower poverty rates, stronger restaurant industry growth, and the same if not higher tipping averages.

Seven other states have already implemented One Fair Wage - and in those states, tipping averages are the same if not higher than states with a tipped subminimum wage. Tipping culture has not gone away in these states, and in fact, now customers know that their tips are truly a reward for good service instead of a subsidy for low wages. Customers consistently tip around 16% in both regions(2), but workers in One Fair Wage states earn 15% more in total income, including both wages and tips, according to the Economic Policy Institute This wage boost benefits all workers, from high tip earners in fine dining to those in casual dining, who report higher wages and tips compared to their counterparts in subminimum wage states.

One Fair Wage states that require employers to pay the full minimum wage to tipped workers, with tips on top, have consistently experienced stronger restaurant industry growth compared to states with a subminimum wage. From 2016 to 2019, full-service restaurant employment in these One Fair Wage states grew by 6.71%, outpacing the 4.9% growth in subminimum wage states. Similarly, small business restaurant employment in One Fair Wage states saw an 8.37% increase, compared to just 5.95% in states with a subminimum wage.(3) Restaurant sales in One Fair Wage states also grew faster, with a 17% increase compared to 15.6% in subminimum wage states.(4) Despite the challenges of the COVID-19 pandemic, the decline in open hospitality businesses was nearly identical between One Fair Wage states and those with a subminimum wage, demonstrating the resilience of these regions even under stricter health restrictions.

The opposition claims raising the minimum wage will force employers to raise menu prices, but in reality, raising the tipped minimum wage to $15/hour plus tips on top would have minimal impact on food costs, with the average American household seeing only a 25¢ increase per day if all costs were passed to consumers, or just 10¢ for every $5.00 in sales. A 2017 study by the Federal Reserve Bank of Boston found that a 10% increase in the minimum wage led to only a 0.3 percentage point rise in restaurant prices, while also prompting a 0.5 percentage point increase in the amount of food consumed away from home, indicating that higher wages have a modest effect on costs and can even boost consumer spending at restaurants.

The opposition falsely claims that tipped workers earn a lot of money in tips, and don’t need higher wages. According to data retrieved from IPUMS USA, 68% of tipped workers are women, and 41% are people of color, many of whom work in casual restaurants where tips are minimal. As a result, tipped workers live in poverty at more than twice the rate of the overall workforce, with tipped restaurant workers experiencing poverty at 2.5 times the rate.(5) The COVID-19 pandemic exacerbated this issue, with 84% of workers reporting a significant decline in tips, and over two-thirds seeing their tips cut by half or more. Additionally, servers rely on food stamps at more than 1.5 times the rate of the general working population, with a median wage of just $11 an hour after including tips.(6) Most tipped workers are adults, with over 60% being above age 24, and nearly 30% are parents, including a significant number of single mothers who take great pride in their roles as hospitality professionals.

While it’s easy to say that the government should just enforce the existing laws, the truth is that the two-tiered wage system is unenforceable. The restaurant industry - the largest employer of workers making less than the minimum wage - frequently violates wage laws. A Department of Labor investigation found that nearly 84% of investigated restaurants had wage and hour violations, with major chains routinely settling wage theft cases for millions of dollars.(7) Even with enforcement, the subminimum wage forces a workforce, over two-thirds of whom are women, to endure the highest rates of sexual harassment in any industry, as they rely on tips to make ends meet. A study by One Fair Wage revealed that 76% of tipped workers experienced sexual harassment, and these incidents were less likely to be addressed compared to those involving non-tipped workers. One Fair Wage states see half the rates of harassment and assault as subminimum wage states in the restaurant industry, as workers can count on the full minimum wage and rely less heavily on the whims and behavior of customers and their tips.

In 2018, One Fair Wage secured a Congressional budget rider allowing restaurants that pay a full minimum wage with tips on top to share tips with back-of-house staff. Back-of-house workers tend to be immigrants and people of color, and the tipping system only leads to increased disparities and forced separation between front-of-house and back-of-house workers. By allowing restaurants and bars the option to include back-of-house workers in the tip pool after tipped workers are paid $15/hour plus tips on top, it would increase teamwork within all restaurant staff, and lift up all workers. When everyone feels like they “have skin in the game”, they all feel heightened responsibility toward ensuring the customer has an excellent dining experience. Including back-of-house workers in the tip pool also acknowledges their role in the dining experience, from making the food correctly to ensuring plates and cutlery are clean.

Cornell University, home to the nation's leading School of Hospitality Management, found that offering higher wages and better benefits can nearly halve employee turnover in restaurants.