Do you feel for people working a minimum wage job and trying to survive? Raising the federal minimum wage to $15 an hour by 2025 – the proposal that was included in the latest stimulus bill – would have boosted pay for some 32 million workers across the U.S. according to analysis from the Economic Policy Institute and the National Employment Law Project.
The White House’s proposal would have raised the minimum wage from its current level, $7.25, to $15 with increases of approximately $1.50 every year for five years.
Today, an individual working 40 hours a week and making the federal minimum wage would make $15,080. The federal poverty level in 2021 is $12,880.
In 2020, the Department of Health and Human Services set the federal poverty level at $26,200 for a family of four. That's equivalent to about $12.60 per hour for a full-time worker. A living wage must at least be greater than the poverty level.
A worker making the minimum wage of $7.25 per hour would be below the poverty level. Both parents would need to work minimum wage jobs to even hope to reach a living wage.
(“HHS Poverty Guidelines.” Office of the Assistant Secretary For Planning and Evaluation. February 01, 2021.)
So, a single person working full time and making minimum wage is technically above the poverty level. However, if the person has even one dependent and is making minimum wage, they fall below the federal poverty level of $17,420.
(Zachary B. Wolf. “Everything you need to know about the debate over the $15 minimum wage.” CNN February 25, 2021.)
So, can you guess who would, specifically, benefit the most by the $15 an hour minimum wage proposal?
Actually it is self-evident. 19 million workers would benefit most – they are a majority of the female workforce, disproportionately young and women of color, struggling to make ends meet. And the value of this benefit especially applies to those women who are most subject to the tipped-minimum-wage. By far, restaurants lead all other industries claiming 63 percent of all tipped jobs in the U.S.
The provision that was included in the latest stimulus package would have both raised the federal minimum wage to $15 over time and eliminated the tipped-minimum-wage altogether.
Women make up 66% of workers who make the tipped-minimum-wage – and especially women of color, according to Saru Jayaraman, president of One Fair Wage.
“Women are really feeling the effects of this coronavirus pandemic,” said Diana Boesch, a policy analyst for women’s economic security at the Center for American Progress, a liberal think tank.
That women make up most workers currently earning minimum wage is due mostly to occupational segregation and under-valuing women’s work, according to Boesch.
A minimum wage increase won't just increase family incomes and pull more workers out of poverty – it can also be an important step towards racial equity.
“A single-mother with two children earning the federal minimum wage of $7.25 per hour needs to work 138 hours per week, nearly the equivalent of working 24 hours per day for six days, to earn a living wage.”
– Dr. Amy K. Glasmeier and the Massachusetts Institute of Technology “Living Wage Calculator”
And the women who make the tipped minimum wage are also a key piece of the economic recovery. Women, especially those who are breadwinning mothers, generally put any increase in wages back into the economy. That spending, often on basic necessities to support families, is incredibly important to spur economic growth, Boesch said. This injection of wages will help stimulate the economy and spur greater business activity and job growth.
(Carmen Reinicke. “A $15 federal minimum wage would give 19 million women a raise – but it might not happen anytime soon.” CNBC. March 02, 2021.)
“Nearly one-third (31%) of African Americans and one-quarter (26%) of Latinos would get a raise if the federal minimum wage were increased to $15. Almost one in four (23%) of those who would benefit is a Black or Latina woman.”
– Economic Policy Institute, 2021
Tipped-Minimum-Wage
The United States federal government requires a wage of at least $2.13 per hour be paid to employees who receive at least $30 per month in tips. If wages and tips do not equal the federal minimum wage of $7.25 per hour during any week, the employer is required to increase cash wages to compensate. In addition, some workers with disabilities are also subject to the $2.13 an hour minimum wage.
Though the vast majority of employers are bound to the federal minimum wage, some states have chosen to increase the tipped minimum wage above the federal requirement.
To bring this home for Ohio readers, the minimum-tipped-wage today is $4.40/h. and tipped wage plus tips must reach $8.80/h. Employers who gross less than $314,000 annually will not be covered by the Ohio law.
Eliminating the tipped-minimum-wage does not mean getting rid of tipping altogether. There could and likely still would be plenty of tipping at restaurants. It just means that servers and other tipped employees wouldn’t be dependent on tips to make minimum wage. The changes would mean that employers would have to pay every worker at least $15 an hour, even if they receive tips.
California doesn’t have a tipped-minimum-wage, One Fair Wage’s Saru Jayaraman points out, and yet (for better or worse) tipping culture remains strong.
(Rachel Sugar. “Why Joe Biden’s Pledge to End the Tipped Minimum Wage Is a Big Deal.” Grub Street. September 08, 2020.)
Legally, tipped-minimum-wage workers are supposed to be taking home at least the equivalent of regular minimum wage, because employers are required to make up the difference if tips fall short.
But restaurants, The New Republic observes, are not especially known for their compliance: In a 2010–2012 sweep of 9,000 restaurants, the U.S. Department of Labor found 1,170 tip-credit violations.
Here is an example of unfairness in the tipped-minimum-wage:
“Take, for example, the case of one restaurant worker in Michigan, who told The New Republic she can only count on earning $40 per shift. “Her days can last longer than 11 hours,” the magazine reports, 'but under state law she can be paid as little as $3.67 an hour.'
“In theory this is livable, because that’s only supposed to be a fraction of her income; the rest is supposed to come from tips. The problem is that tips depend on a number of factors, most of which are out of her control: whether it’s raining, whether it’s busy, whether her customers are in good moods, whether there’s a global pandemic. 'It’s all guesswork, because there is no steady income,' she says.”
(Bryce Covert. “Kill the Tipped Minimum Wage.” The New Republic. July 08, 2020.)
There is mounting evidence that tipped-minimum-wages “encourage racism, sexism, harassment, and exploitation in the workplace,” largely because it means that workers are at the mercy of two paying bosses – the restaurant and the customers – and while restaurants are at least supposed to be governed by U.S. labor laws, customers are not.
Of course, unemployment benefits don’t cover missing tips. Instead, it’s calculated based on the tipped minimum wage. In most of the country, One Fair Wage’s Saru Jayaraman told FERN that restaurant workers who are able to collect unemployment are getting it “based on $2 or $3 an hour.” (In New York City, it’s now $10.)
(Rachel Sugar. “Why Joe Biden’s Pledge to End the Tipped Minimum Wage Is a Big Deal.” Grub Street. September 08, 2020.)
In their 2011 paper, Allegretto and Filion gave a historical account of the tipped-minimum-wage policy and brought much-needed attention to how the two-tiered wage system results in significantly different living standards for tipped versus non-tipped workers.
For instance, tipped workers experience a poverty rate nearly twice that of other workers. The 2011 report, coupled with more recent publications from the White House (2014) and the Congressional Budget Office (2014), contradicts the notion that these workers’ tips provide adequate levels of income and reasonable economic security.
(Sylvia A. Allegretto and Kai Filion. Waiting for Change: The $2.13 Federal Subminimum Wage. Economic Policy Institute and Center for Wage and Employment Dynamics, Briefing Paper #297. 2011.)
While the poverty rate of non-tipped workers is 6.5 percent, tipped workers have a poverty rate of 12.8 percent. Tipped workers are thus nearly twice as likely to live in poverty as are non-tipped workers.
Due to their low wages and higher poverty levels, 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.
The sub-minimum wage for tipped workers has remained at $2.13 since 1991. In 1996, it was decoupled from the regular minimum wage, such that the tipped wage remained at $2.13 even as the regular minimum wage was increased. At that time, the tipped minimum wage was equal to 50 percent of the regular minimum wage; today it is only equal to a record low 29.4 percent of the regular federal minimum wage of $7.25.
(Sylvia Allegretto and David Cooper. “Twenty-Three Years and Still Waiting for Change: Why It’s Time to Give Tipped Workers the Regular Minimum Wage.” Economic Policy Institute. July 10, 2014.)
“The majority of workers who would benefit are adult women—many of whom have attended college and many of whom have children.”
“More than half (51%) of workers who would benefit are adults between the ages of 25 and 54; only one in 10 is a teenager.”
“Nearly six in 10 (59%) are women.
More than half (54%) work full time.
More than four in 10 (43%) have some college experience.
More than a quarter (28%) have children.”
– Economic Policy Institute
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