Wednesday, February 20, 2013

Why is the Minimum Wage Tip Credit Wrong?

The minimum wage tip credit is one of the most archaic and backwards wage laws in the modern day.  It trumps the minimum wage itself as one of the most regressive, immoral, and economically unjust labor laws on the books, nation wide.  Many of you don't know what a minimum wage tip credit is.  So for those who don't, I'll lay it out on the table for you.  The minimum wage tip credit is a benefit for employers of tipped employees.  It enables an employer to basically pay you just enough in cash wages so that your payroll and income tax deductions are paid, and your tips are your sole source of income.

For example, say I work for Applebee's in South Carolina.  In South Carolina, the minimum wage is $7.25/hr.  Per federal rules, as a tipped employee, your employer is obligated to pay you $2.13/hr for the services you offer to the company.  Some servers are generally content with this arrangement as they get an ok to great amount of tips for the work they do.  Some are not so lucky, literally being cheated out of their wages simply because of their "tipped" status.  But, as someone who has worked as a server, I know first hand that what you actually get in tips, and what the company says you do can vary greatly.  Some companies use your sales to determine how much withholding to do on your final paycheck.  Furthermore, the burden of proof to show you made less than minimum wage is on you...meaning you have to prove to the company you didn't make that much.

Washington State is the only state without the minimum wage tip credit on the books.  We require employers to pay full minimum wage for the work a tipped employee performs.  This also means that tipped employees can actually earn a livable wage and live.  Restaurants in this state perform quite well and the prices are still competitive.  Furthermore, employees are more likely to retain their jobs because the pay provides them enough money to meet their needs, plus the cash in pocket every night.  Across the country, though, this is not the case.  There are servers, waiters, bar tenders, and delivery drivers across the country earning a pitiful amount of money because their employers can basically get a wage subsidy.  That wage subsidy pushes the wage obligation onto patrons and guests to pay, leaving the employer to soak up all the profits and unjustly compensate the employees with little to nothing in the form of wages.  And wages generally represent the cut of profits that employees help generate.  There is no rational, fair, and reasonable justification for allowing this archaic practice to continue.  It's important to remember that what "The Right" contends as government interference in the economy is actually correcting a severe injustice which causes severe harm to thousands of servers across the country.  Using Washington as a model, it's important to realize that mandated higher wages do not cause the problems that "The Right" contends it does.  We have a low unemployment rate 7.8%, in step with or below the Federal Rate...and have had so historically, we have a strong standard of living, and prices are competitive compared to other area in the country with similar or lower wage levels.  There is no evidence that the higher minimum wage or that the removal of the tip credit would hurt anyone and only empower so many.  Furthermore, there are economic benefits to removing the tip credit, such as increasing the purchasing power of the low income.  The extra money earned from servers, waiters, and the like earning full minimum wage would be a substantial increase in their available disposable income.  This would result in more spending in areas that traditionally would be unreachable by many in server jobs.  More income for the basics, fewer people on the welfare rolls, and more tax revenue for local governments by way of sales and use taxes, and finally, more income for local businesses because more money is being paid out to employees who then spend it in other areas.  There are no downsides to this.

It's time for the minimum wage tip credit to end.  It's an unjust, unfair, unreasonable wage system for the 21st Century.  Tipped employees deserve to make a living wage, they also deserve their share of the profits derived from the business, and they deserve consistent, regular, reliable paychecks that aren't dependent on the whims of the customer traffic they assist.  If this means prices have to rise, then let them I believe they are artificially being held down by downward pressures on wages, and the export of the manufacturing sector to third-world countries.  In times where employees have no bargaining power to negotiate more fair wages, this is where government can step in and make sure that people don't get screwed over with wages that cannot even sustain a basic living.  Government can ensure people can live without the need for the public leg up and be self-sustaining.  It requires tipped employees to be paid fair and just wages for the work they do, and for everyone to collectively work together to achieve this end.

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