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Settling the Bill

The tipped minimum wage has origins in slavery

Sabri Ben-Achour and Erika Soderstrom Sep 19, 2023
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Nikola Stojadinovic via Getty Images
Settling the Bill

The tipped minimum wage has origins in slavery

Sabri Ben-Achour and Erika Soderstrom Sep 19, 2023
Heard on:
Nikola Stojadinovic via Getty Images
HTML EMBED:
COPY

The “Marketplace Morning Report” is spending some time looking at tipping and how service work have changed since the start of the pandemic. Restaurant workers, delivery people and other service industry workers became essential when COVID was at its peak, and in general, people upped the gratuity they paid to reflect that.

Now it seems like the option to tip is popping up in more and more places, and expectations about when and how much to tip are changing. Whether or not you think new norms around tipping have gone too far, it’s important to understand how we got here in the first place.

Saru Jayaraman is president of the service worker advocacy group One Fair Wage. She’s also the director of the Food Labor Research Center at University of California, Berkeley. She spoke with “Marketplace Morning Report” host Sabri Ben-Achour, and the following is an edited transcript of their conversation.

Sabri Ben-Achour: One often heard justification for the system of tipping that we have now is that you can pay workers less than minimum wage because, well, it’ll get made up for by the tips. But I can think of a few industries where one tips: tour guides, barbers, entertainers. In all those industries, they still pay at least minimum wage. So, why is the restaurant industry different?

Saru Jayaraman: Yeah, so it has a pretty ugly and sordid history that relates to our original sin as a country. So pre-emancipation of slavery, waiters in the United States were actually mostly white men, and they did not receive tips. They received wages. In fact, tipping had originated in feudal Europe. When it came to the United States in the 1850s, Americans rejected it. They thought it was a vestige of feudalism. They said, “We’re a democracy.”

So in 1853, the white men who did not get tips got wages working as servers in Boston, Philadelphia and Chicago, went on strike. And, in response, not wanting to pay them higher wages, the restaurant industry started looking for cheaper labor. And after emancipation, they hit upon the idea of hiring newly freed Black people, Black women, in particular, coming up from the South. And telling them, “We’re not going to pay you, you’re going to exist on this thing that’s come from Europe called tips.”

There were two industries that did this, the Pullman trains and the restaurant industry. Of course, hopefully, people know the history of the Pullman car porters, that they organized and won the right to a union and an actual wage, rather than living on tips. The Black women were not so lucky. And they were told by the restaurant industry, “You’re only going to get tips.” And then that was made law in 1938, as part of the New Deal, when everybody got the right to a federal minimum wage, but tipped workers were excluded. At the time, they were mostly black women, and told you get $0 as long as you get tips. Now, we went from zero all the way up to $2.13 an hour at the federal level. Today, tipped workers are still overwhelmingly women, disproportionately women of color. We have the highest rates of single mothers of any occupation and the highest rates of both poverty and sexual harassment. But that is where it comes from.

Ben-Achour: What does the legacy of that arrangement mean for workers today?

Jayaraman: So the way that it works today is that a worker can be paid as little as $2.13 an hour at the federal level. Forty-three states still have a sub-minimum wage for tipped workers. And the law requires employers to ensure that tips bring workers to the full minimum wage. Otherwise, they’re supposed to pay the difference. But the Obama administration found an 84% violation rate of employers actually ensuring those rules are followed, and declared the issue unenforceable.

So, in practice, it means that a worker gets $2, $3, $4, depending on the state. In fact, almost 40 states have wages of $5 or less. It means that they get tips or they don’t get tips. And in most cases, the employer doesn’t care, doesn’t do anything about it. It means that they struggle with three times the poverty rate of other workers, enormous amounts of economic instability, because your rent and your bills don’t go up and down, but your tips certainly do. And it means that this mostly female workforce struggles with the highest rates of sexual harassment of any industry, because they have to put up with so much to get those tips, particularly as a single mother.

Look, if your wage is $2 or $3, it goes actually entirely to taxes. You are living completely on your tips. And you have to put up with whatever a customer does to you or says to you, because they’re always right. They’re the ones paying your bills, not your employer. And that is why we find that sexual harassment in the restaurant industry is actually double the rate in the states that allow a sub-minimum wage, as it is in the seven states that got rid of this system many, many years ago. There are seven states — California, Oregon, Washington, Nevada, Minnesota, Montana and Alaska — that require these workers to be paid a full minimum wage with tips on top. And these seven states have higher restaurant sales and small business growth rates and job growth rates in the restaurant industry. Even people of color-owned small business rates are higher. And one-half the rate of sexual harassment, because it turns out when you pay a woman a full minimum wage, with tips on top, she doesn’t have to put up with as much from customers. So the system has been really horrible for workers in 43 states for 160 years. The beautiful thing is that it’s actually finally changing because of the pandemic.

Ben-Achour: For workers, tips are income as you pointed out, important and problematically variable income. For consumers, some of them might say tips are a way to reward good service, punish bad service, so that they don’t get ripped off, in a sense, if they get bad service. Does that mindset, that normative framework, does that need to go away?

Jayaraman: Absolutely. Especially because, unfortunately, the data shows that tipping in this country is not actually correlated with the quality of service. It’s unfortunately correlated with the race and gender and look of the server. And there’s now mountains of irrefutable evidence around this that’s actually been performed by a professor at Cornell School of Hospitality Management based on data from the chains.

Unfortunately, all of us in America have something known as implicit bias, unconscious bias. And as much as we think we’re tipping based on the quality of service, the data shows that, in sum total, we are not, and a Black woman will always earn $5 to $8 an hour less in tips, even when she is performing what we call “perfect service” than a white man. So the idea that somehow we as a country are rewarding good service, number one, isn’t true, number two, isn’t the way we think about any other service worker. When we walk into a department store or retail environment, we don’t condition the person’s income based on how they interact with us. That isn’t true for other, frankly, customer- or client-facing professionals.

I’m a professor. Imagine if professors’ income was based on whether students were pleased with the grade that they got, or doctors or lawyers. What if their income was based on whether they pleased us or not with their diagnosis? It is a gross, frankly, kind of undervaluing of these workers who are professionals. It’s not that this work is not skilled. It’s that we treat these workers as if they’re not professionals. And during the pandemic, that sort of dichotomy became very, very obvious. Workers’ reported tips went way down, because sales went down, harassment went way up. We heard from so many women, “I’m regularly asked, ‘Take off your mask so I can see how cute you are before I decide how much to tip you.'”

And when they were asked to enforce COVID protocols on the same people from whom they had to get tips, they started leaving en masse — 1.2 million workers have left the industry. We’ve surveyed thousands. They’re saying the top reason they’re leaving is that they just refuse to put up with this wage any longer, which means it’s the first time since emancipation that we’re seeing workers wholesale reject this system. And as a result, they have power. And as a result, we’re seeing thousands of restaurants that have voluntarily moved from paying $2 or $3, to paying $15 and $20 and $25. And they have joined forces with us. We now have an association of 2,500 restaurants that have joined forces with us saying, “You know what, we need policy. Because we can’t be raising wages alone, we need a level playing field. And we need policy that is going to bring workers back — signal to them, “There are permanent wage increases on the horizon, come back, it’s worth working in restaurants.”

Ben-Achour: So is the solution then to convince more restaurants to just have a built in service fee? Or is the solution some some kind of law?

Jayaraman: The solution is that policymakers need to follow the industry, which is already moving in this direction. As I mentioned, we’ve tracked 6,000 restaurants that have moved already to a full minimum wage voluntarily. And as a result of that massive market upheaval, we decided it was time to go big. We’ve been moving bills and ballot measures in 25 states, half the country. We won this issue in Washington, D.C. in November. Tipped workers won a raise from $5 to $16 an hour. We are on the verge of victory in Chicago; Cook County, [Illinois]; multiple Maryland counties. It’s moving as legislation in 10 states. And we’re on the ballot in four more states next November.

And so there is so much more momentum than I’ve ever seen in the 22 years that I’ve spent working on this, so much more momentum for change coming from both workers and employers, who are now both saying the solution is policy change that requires everybody to pay a full minimum wage with tips on top, as already exists in seven states.

Ben-Achour: What’s the incentive for restaurant managers, restaurant owners to get on board in the way that they have?

Jayaraman: The biggest incentive right now is just this the industry is going through the worst staffing crisis in the history of the industry. When 1.2 million workers have walked off the job saying, “I can’t even afford to work in the restaurant industry anymore. It costs me more in gas and child care to get to work than I earn when I get there.” You know, $3, $4 or $5 is not enough to cover one gallon of gas and so workers are making perfectly economically rational decisions not to work in this industry. And, as a result, managers and owners are desperate to find staff, competing over workers. And that is why we have so many employers who have joined forces with us to say the time has come for change.

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