Study Finds Eliminating State Tip Credits Could Cost 800k Jobs, $2.2B in Earnings

Average Tipped Worker Families Could Lose Nearly $1,300 in Annual Income
  • Publication Date: November 2022

Arlington, VA (November 3, 2022) – Today, the Employment Policies Institute (EPI) released a new analysis by economists from Miami and Trinity Universities estimating the consequences of eliminating the separate minimum wage for tipped employees.

The study results speak directly to current efforts to eliminate state and local tipped wages through various legislation and ballot measures. The tipped wage enjoys wide support from tipped workers, who are guaranteed to earn at least the minimum wage and take home far more than that with tips included. Labor organizations such as One Fair Wage have launched multi-million dollar campaigns to achieve these outcomes, despite the protests of tipped workers who prefer the current system and have fought against changing it.

A study released earlier this year by University of California-Irvine economists found state laws reducing tip credits caused significant losses in employment and earnings. Another recent study from Cornell University found reducing tip credits also reduces tip percentages earned by full-service restaurant workers.

This new study, conducted by Dr. William Even (Miami University) and Dr. David Macpherson (Trinity University), details job and earnings loss figures under a $15 per hour minimum wage for tipped restaurant employees. Findings include:

  • The United States could lose as many as 801,224 restaurant industry jobs under a $15 minimum wage with no tipped wage;
  • States experiencing significant job losses would include Texas (127,477 lost), Ohio (63,205 lost), Pennsylvania (57,291 lost), North Carolina (46,738 lost), and Michigan (43,568 lost);
  • Full-service restaurant employees across the U.S. could lose nearly $2.2 billion in total annual earnings due to a $15 tipped minimum wage. States where employees may see the largest earnings losses include Texas ($452 million in earnings lost), Georgia (-$151 million), North Carolina (-$143 million), Virginia (-$129 million), and Tennessee (-$113 million).

Read the full report, with state-level statistics, here.

“Proposals to eliminate the tipped wage will have a severe negative impact on tipped workers and their families,” said Rebekah Paxton, Director of Research for the Employment Policies Institute. “Data shows tipped restaurant workers earn more under the current tipped wage system than a flat $15 minimum wage, which is why tipped workers have fought against these harmful proposals.”