Michigan, Arizona, Ohio, Connecticut and Massachusetts want to change how workers who receive tips are being paid

This year, five states are considering whether to stop paying workers who receive tips a lower wage than the minimum wage. Activists are also taking this issue to at least five more states, saying it’s important for living costs during an election year.

There are plans for votes in Michigan, Arizona, Ohio, and Massachusetts, and a law is being proposed again in Connecticut to get rid of the different pay levels for workers like restaurant servers and bartenders who get tips. These workers currently get paid a smaller base wage compared to workers who don’t get tips.

Right now, only seven states pay the same minimum wage to all workers, whether they get tips or not. Over twenty-five states pay tip earners more than the federal minimum of $2.13 per hour, a rate that hasn’t changed since 1991, but these workers still make less than the minimum wage in their states.

Employers are supposed to make sure workers earn at least the federal minimum wage of $7.25 per hour when tips are included, but it’s reported that this doesn’t always happen as it should.

New York is becoming a major area for this issue, as it introduced a $15 minimum wage on January 1, but this doesn’t apply to workers who earn tips. Activists and some politicians are trying to change this and are asking Governor Kathy Hochul to include everyone under the same wage rule in her 2024 budget plan.

Supporters are encouraged by recent changes, like in Chicago, where the city decided to gradually eliminate the lower wage for tipped workers until it matches the city’s minimum wage of $15.80. This happened less than a year after Washington, D.C., did something similar, which many people supported.

Saru Jayaraman, head of One Fair Wage, a group that fights for equal pay for all workers, said there’s a lot of support for these changes after their success in Chicago. She mentioned that thousands of restaurants nationwide have already started paying all their workers the same base wage, plus tips.

Besides New York and Connecticut, the campaign to end lower wages for tipped workers is moving to Illinois, Maryland, Hawaii, and Rhode Island in 2024. In total, 13 states are looking at making similar changes this year through different methods.

“It’s about a massive shift that’s happened in the restaurant industry post-pandemic,” said Jayaraman, who also directs the Food Labor Research Center at the University of California, Berkeley.

As businesses opened up again and had trouble finding workers, and as the prices of everything from vegetables to rent went up because of inflation, tips weren’t enough to help workers earning below the minimum wage make ends meet, according to Jayaraman. She noted that by the time a law was voted on in Chicago, about a third of the city’s restaurants that were desperate for staff had already raised their prices so much that the new rule didn’t really affect them.

After the pandemic, people started tipping a bit more, but there was a lot of complaining about it, even though they did tip more frequently and in more places. Lately, people have been getting tired of constantly being asked to tip, especially with digital payment systems asking for tips more often.

“We’ve definitely observed a slight increase in tipping over the last few years,” the payments processor Square told NBC News in November, but the upticks were “a lot more modest than people realize.”

For a lot of workers, like bartenders and servers, this has meant they’re taking home less money. Some told CNBC that they’re making up to 30% less than they used to, blaming the negative reaction to the increase in expected tips, a phenomenon some are calling “tipflation.”

Those against getting rid of the lower wage for tipped workers, including groups from the restaurant industry, argue that this wage system is vital for small businesses that barely make a profit. They say without it, they’d have to increase their prices or add vague service charges to customers’ bills to cover the higher wages. They also believe that tipping is the best way to encourage excellent service, as the chance of getting a big tip motivates workers.

Sylvia Allegretto, a leading economist at the Center for Economic and Policy Research, argues that the restaurant industry has long used concerns about its health to keep wages low. She questions the argument by pointing to California, where there’s a $16 minimum wage and no lower wage for tipped workers, yet restaurants still operate successfully.

Jayaraman also addresses worries about competition, emphasizing that fair pay needs to apply to all businesses, not just those that can afford to pay more. She points out that the current system of different wages is causing labor costs to rise by making it harder to hire and keep workers. Many workers, she says, refuse to return to their jobs unless there’s a law ensuring fair wages.

One Fair Wage aims to eliminate lower wages for tipped workers in 2024, a year with elections where living costs are a major concern for many. The group is pushing for ballot measures in states like Michigan, Arizona, and Ohio, and also in California to end lower wages for prisoners, aiming to increase the minimum wage across these states.

Jayaraman argues that depending solely on tips isn’t sustainable anymore. The upcoming year will test whether voters and lawmakers are ready to embrace these changes.

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