Employment, Earnings, and Poverty in the Full-Service Restaurant Sector
The Fair Labor Standards Act outlines the current tipping system in the United States, whereby customer-facing employees earning tips for their service are paid a required minimum base wage ($2.13 per hour at the federal level) in addition to the tips they earn. The gap between this base tipped wage and the regular federal minimum wage for non-tipped employees is called a “tip credit,” which employers can take to pay their tipped employees as long as their tip income added to the base wage amounts to at least the hourly regular minimum.
- Employment loss: A $1 increase in the federal tipped wage could cause as large as a 6.1% decrease in employment across the entire full-service restaurant sector.
- Earnings loss: A $1 increase could cause as much as a 5.6% decrease in total quarterly earnings for full-service restaurant employees.