Lower Minimum Wage for City’s Tipped Workers Hurts Latinos

David R. Jones, La Nueva Mayoria / The New Majority

In 2013, state legislators struck a deal raising the minimum wage from $7.25 to $8.00 an hour in 2014. It was the first increase in pay for New York’s minimum wage workers in New York since 2009.

Driven by polls showing widespread public support for increasing the minimum wage, localities across the country are passing increases to their minimum wage standards.  Five states, plus Washington, D.C. are set to gradually increase their minimum wage to $10.00 an hour or higher. Cities such as San Francisco and Santa Fe are already well past that mark. Most notably, Seattle recently passed a bill to increase their minimum wage to $15.00 an hour by 2018.

Against this backdrop New York’s minimum wage, which is scheduled to increase to $8.75 an hour at the start of 2015 and $9.00 an hour at the start of 2016, is drawing new scrutiny. Many believe the state’s minimum wage is inadequate. This includes Mayor de Blasio who is calling on Albany to allow the city authority to set a local minimum wage that would be up to 30 percent higher than the state minimum wage

No Increase in Minimum Wage for Tipped Workers

However, there is one group of workers still waiting for any increase in pay at all. The vast majority of tipped workers – who are covered by a separate, lower minimum wage at both the federal level and in most states – did not receive an increase in their minimum wage in 2014. This includes the 172,000 tipped workers in the state’s accommodations and food services industry, nearly half of whom are in New York City.

In New York, the minimum wage remains $5.00 an hour for food service workers and $5.65 an hour for service employees.  The rationale behind the lower tipped minimum wage is that employees will make up the difference in base salary with their tips. Yet the reality for a sizeable share of tipped workers in New York is that they earn, on average, significantly less than the workforce as a whole even when including their tips.

My organization will release a report next week showing that tipped workers in New York are more than twice as likely to live in poverty as workers in non-tipped occupations. These findings will be presented at the October 20th hearing of the 2014 Wage Board which was empanelled by Gov. Cuomo to review the tipped minimum wage. Overall tipped workers in the state have a poverty rate of 15.7 percent, compared to 6.8 percent for those who are employed in non-tipped occupations. In New York City, the poverty rate for tipped workers is 16.8 percent, compared to 7.8 percent for those in non-tipped occupations.

37 % of Tipped Workers in New York City Are Latino; More than Any Other Ethnic Group

The situation for Latino tipped workers, particularly in New York City, is especially dire because these workers are often the head of their household and the primary or sole source of income.  The poverty rate for Latinos in New York City who work in predominately tipped occupations is 18.5 percent.  While the notion that many tipped workers are young and dependent on others to support a household may still hold some truth nationwide, the story for tipped workers in New York City, particularly Latinos is a completely different story. 

Tipped workers are more likely than workers overall to rely on public assistance such as food stamps and Medicaid.  In New York City, 20.1 percent of tipped workers utilize food stamps and 21.7 percent receive Medicaid, compared to 14.2 percent and 13.2 percent of the overall workforce who receive food stamps and Medicaid, respectively.   The increased reliance on food stamps, Medicaid, and other public benefits shifts the costs of basic needs from the employer to the taxpayer. 

There is strong public support for raising the tipped minimum wage in New York so that it is equal to the overall minimum wage. Our latest Unheard Third poll found that 80 percent of respondents said they would favor raising the tipped minimum wage to $8.00 an hour. Among Latinos, 84 percent favor raising the tipped minimum wage with 72 percent strongly in favor.

New York City has created more than 440,000 new private sector jobs since the depths of the recession.  Most of these jobs are in retail, food services and fast-food restaurants where the wages are low.  As these sectors continue to generate large job growth, it’s imperative that we ensure workers in the industry are paid a fair wage.

Issues Covered

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