In his latest State of the State address, Gavin Newsom proudly touted the state’s various minimum wage laws as promoting “fairness” for Californians. The speech drew applause, but for much of California’s restaurant workforce, the data shows reality has been far less celebratory.
California is praised by anti-tip credit activists as the model for a “One Fair Wage” state, since it does not allow employers to count servers and bartenders’ tips as income toward the minimum wage. Since the state minimum wage is one of the highest in the country (now $16.90 an hour) and many localities have pushed it even higher, meaning restaurants have had to absorb steep yearly wage hikes. It’s gotten so bad, Restaurant Furniture, a restaurant equipment retailer, deemed it the “hardest state to open a restaurant.”
New data shows this has backfired on workers: California once again has the lowest average tipping percentage in the nation, for the third year in a row. According to the 2025 Restaurant Trends Report by point-of-sale platform Toast, California’s average tipping percentage left in full-service restaurants dropped again in 2025. In fact, 4 out of the 5 lowest tip percentages in the nation were so-called One Fair Wage states that don’t allow tip credits: California, Washington, Nevada, and Alaska.
By contrast, the states with the highest tipping percentages, such as New Hampshire, West Virginia, Ohio, and Pennsylvania, retain the strongest tip credit.
California’s history of wage hikes with no tip credit allowance has made it one of the hardest states to operate a restaurant. In fact, EPI analysis of Golden State restaurant employment data shows full-service jobs have been on the decline for years, and make up a lower share of total California employment than a decade ago.
It’s no surprise California’s anti-tip credit policies are hurting workers: UC-Irvine economists find laws eliminating tip credits reduce overall earnings and slash jobs. In a recent study, they found a $1 increase in the wage for tipped restaurant workers could cause roughly a 6% decline in full-service restaurant employment, and a similar decrease in employees’ earnings.
Smaller tips mean fewer chances to exceed the minimum, less flexibility in earnings, and weaker incentives for experienced workers to stay in the industry. For many, the promise of fairness has translated into more rigid pay and fewer opportunities to earn more through performance.
Activists in favor of “One Fair Wage” argue changing the base wage won’t have negative consequences. Yet data shows that workers are worse off when the tip credit is eliminated, losing earnings and in many cases, their jobs. California should be a cautionary tale for any locales considering trying the One Fair Wage experiment.