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Tipped Workers Are Nearly Twice as Likely to Be Poor

Tipped Workers Are Nearly Twice as Likely to Be Poor

Photograph by Kathrin Ziegler/Getty Images

Tipped workers are almost twice as likely to be living in poverty as their counterparts who aren’t tipped, according to a new study from a liberal think tank.

Tipped workers have a poverty rate of 12.8 percent, compared with a poverty rate of 6.5 percent for other workers, Sylvia Allegretto and David Cooper write in a briefing paper released on Thursday by the Economic Policy Institute, with funding from the Ford Foundation. Drawing on federal data, Allegretto and Cooper find that the median wage for tipped workers—tips included—is just $10.22, compared with $16.48 for workers overall. Almost two-thirds of tipped workers are women. Contrary to stereotype, more than half are older than 25, and a quarter are in their forties or older. “Due to their low wages and higher poverty levels,” the authors write, “about 46.0 percent of tipped workers and their families rely on public benefits, compared with 35.5 percent of non-tipped workers and their families.”

EPI isn’t releasing this study now by accident. While Democrats’ push for a federal minimum wage hike seems stalled, one big under-the-radar issue is whether any future increase will touch the lower minimum wage that companies are allowed to pay tipped workers, which has been static at $2.13 since 1991. Labor groups are pushing to narrow or eliminate the gap between the tipped minimum wage and the standard one; business groups are staunchly opposed. (By law, tipped workers whose tips don’t make up the difference between that and the regular minimum of $7.25 are entitled to have their boss make up the difference, but advocates argue that often doesn’t happen in practice.) Seven states currently require companies to pay tipped workers the same minimum as everyone else. The new report finds that tipped workers in those states are less likely to be poor, and that leisure and hospitality employment grew faster in those states than in the rest of the country.

Eidelson is a reporter for Bloomberg Businessweek in Washington.

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