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As New York City’s restaurants and hotels thrive in this economy, the tipped workers they employ who do everything from busing tables to delivering food are struggling to put food on their own tables with inadequate wages and unreliable tips. In New York City and statewide, tipped workers are more than twice as likely to live in poverty compared to non-tipped workers, and rely more on public benefits such as food stamps and Medicaid, representing a shift in labor costs on to the public.
These are among the findings of a new Community Service Society (CSS) report released today that examined the impact of the current state minimum wage on tipped workers in the food service and accommodation industry. The release of the report, “New York’s Tipped Workers and the Sub-Minimum Wage,” coincides with a public hearing by the state’s wage board which is examining whether to increase the tipped minimum wage.
“The people who serve us drinks and meals and work full time should not be paid a sub-minimum wage. But that’s the reality for thousands of workers in New York,” said David R. Jones, President and CEO of the Community Service Society. “Even though the economy is creating jobs in large numbers, the issue is one of adequate wages for a day’s work. The status quo of paying workers poverty wages for full-time work is unacceptable. Our state leaders can improve the situation by mandating a single minimum wage covering all workers.”
Overall, the CSS report found that New York’s tipped workers earn, on average, significantly less than the workforce as a whole even when including their tips. For example, one out of five tipped workers in New York State makes less than the current state minimum wage of $8.00 an hour even when including tips. Thirty percent of tipped workers in the state earn less than $8.88 an hour, which for a full-time, year round worker translates to just $18,470 dollars annually, not enough to keep a family of three out of poverty.
While the city’s tipped workers fare slightly better than those in the rest of the state, thirty percent still make less than $10 an hour including tips, and these earnings must go further given New York City’s higher costs for housing and other expenses. The situation for Latino and Asian tipped workers, who represent nearly two-thirds of all tipped workers 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.
172,000 Tipped Workers Left Out of 2013 Increase in Minimum Wage
In 2013, New York State legislators reached a deal to increase the state minimum wage from $7.25 to $8.00 an hour. However, the deal left out 172,000 tipped workers in the state’s accommodation and food services industry, nearly half of whom are in New York City. For food service workers the minimum wage is $5 an hour 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.
CSS’s analysis of poverty rates among tipped workers in New York tells a different story. 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.
Further, when comparing poverty rates among tipped workers in states with the federal $2.13 an hour tipped minimum wage, states with a two-tier system but a tipped wage above the federal tipped minimum wage, and states with a single minimum wage covering all workers, the data shows that tipped workers in states with a single minimum wage fared far better economically. Specifically, the poverty rate for tipped workers in states with a single minimum wage is 15.5 percent – 8.2 percentage points lower than in states that allow for a $2.13 an hour minimum wage, and 4.2 percentage points lower than in states with a partial tip credit.
“There is ample evidence from around the country that an equal minimum wage for tipped workers will not be the end of restaurants and the hospitality industry,” said Apurva Mehrotra, author of the report and a CSS Policy Analyst. “Yet, instead of working toward eliminating the minimum wage gap for tipped workers, that gap is only growing larger in New York, and will grow larger still in the coming years unless action is taken.”
In New York City there is strong public support for raising the tipped minimum wage in New York so that it is equal to the overall minimum wage. According to the Unheard Third 2014 survey, 80 percent of respondents said they would favor raising the tipped minimum wage to $8.00 an hour, including two-thirds who said they would strongly favor an increase. Public support cuts across income levels and party affiliation.
Research shows that modest increases to the minimum wage do not have an adverse impact on employment. Businesses are able to deal with modest minimum wage increases through a variety of channels, from improvements in efficiency to wage compression to reduced turnover. An increase in the minimum wage will also result in increased spending from workers earning more money, providing a source of stimulus for the local economy.
New York continues to fall behind other states in ensuring fair wages for low-wage workers. Even with the overall minimum wage going up to $9.00 an hour by 2016, New York still lags behind several states and cities that have successfully pushed for higher minimum wages. And as the state minimum wage goes up, the relative value of the tipped minimum wage will only decline further. New York should join the seven states (plus Hawaii) that do not have a separate minimum wage for tipped workers.
The Unheard Third 2014 was conducted by the national polling firm Lake Research Partners for CSS, from July 25th to August 21st, 2014. It surveyed 1,615 New York City residents of all income levels and had a margin of error of plus or minus 3.1 percentage points for the lower income sample and plus or minus 4.0 percentage points for higher income. It is the only annual survey of low-income opinion in the nation.