Study Showing Tipped Minimum Wage Trends Serves as Cautionary Tale for Lawmakers
Study from University of California-Irvine Economists shows a higher tipped minimum wage is “never associated” with reducing poverty among restaurant workers
Publication Date: August 2022
Washington, D.C. – (August 15, 2022) Today, the Employment Policies Institute (EPI) released a new study by University of California-Irvine economists David Neumark and Maysen Yen that follows state tipped minimum wage hike trends over the last decade.
The study comes as organizations such as One Fair Wage continue to push restaurants and lawmakers to end the use of tip credits, and instead push for a flat minimum wage for traditionally-tipped restaurant employees. Key findings serve as a cautionary tale:
Over the past decade, the study shows that a higher state tipped minimum wage is “never associated” with reducing poverty rates among restaurant workers;
Tipped employees are roughly 20 percent less likely to be below the federal poverty line than others earning at or below the minimum wage; and
A $1 increase in the federal tipped wage could cause as large as a 6.1% decrease in full-service restaurant employment, and a 5.6% decrease in total quarterly earnings for these employees.
The Employment Policies Institute also placed a corresponding op-ed in Crain’s New York Business urging lawmakers to steer clear of the flat wage experiment that states and restaurants, most recently including David Chang’s Momofuku Ko, have tried and subsequently reversed.
“Neumark and Yen’s findings add to a large body of research showing tipped wage hikes have negative consequences for tipped employees and restaurants,” said Michael Saltsman, Managing Director of the Employment Policies Institute. “Data from the Bureau of Labor Statistics also shows a wave of pre-pandemic tipped wage hikes have already taken a toll on full-service restaurant employment. More heedless hikes will further amplify job and earnings losses for tipped restaurant employees across the country.”