Commentator argues that tipping should be abolished because it promotes wage theft and inequality.
With the rising popularity of tipping prompts at checkout counters, customers are being asked to tip in new situations. As a result, determining the right amount to tip has become a question of more than just arithmetic.
Under federal law, the minimum wage for workers who customarily receive tips is just $2.13 an hour, compared with the standard minimum wage of $7.25. In a forthcoming article, Alec Beller, a law student at the Southern University Law Center, argues that this two-tiered minimum wage system should be abolished because it leads to racial disparities in income and allows employers to underpay workers with little regulatory oversight.
Beller notes that tipping—payments “to insure promptitude”—was once popular in medieval Europe. Beller observes that, in the United States, it was only after the Civil War that the practice began to gain steam, when well-traveled Americans tipped to show off their familiarity with European customs.
Beller cautions that tipping in the United States has a history of being used for racially discriminatory purposes. He notes that the Pullman Company encouraged customers to tip railroad porters, who were typically Black, because this kept the company’s wage expenses down.
Beller explains that disdain for this cost-shifting drove an anti-tipping movement in the early 1900s, culminating in several states passing legislation to ban tipping entirely. Beller notes, however, that much of this legislation was repealed several years later due to problems with enforcement. In addition, businesses engaged in extensive lobbying in an effort to return to the previous wage-shifting status quo that tipping had allowed.
Beller observes that although the federal law governing wages—the Fair Labor Standards Act—was passed in 1938 with the mission of assisting the underpaid and overworked, it was not until 1966, when this law was amended, that it addressed tipping. Beller explains that these amendments created the modern tipped credit system. Under this system, employees who regularly receive more than $20 a month in tips can be paid a sub-minimum wage by employers. Federal law permits this sub-minimum wage on the assumption that, when tips are added in, the wage will equal or exceed the standard minimum wage.
Beller contends, however, that this regulatory framework has several flaws. For example, he notes that many employees do not know that federal law entitles them to any shortfall below the standard minimum wage that low tipping can create. As a result, Beller argues that this sub-minimum wage can lead to wage theft when employers do not fill in the shortfall.
Furthermore, Beller argues that tipping can lead to disparities in income. For example, he notes that one study found that white cab drivers were tipped 61 percent more on average than Black cab drivers. He also explains that tipped workers are also more likely to be younger, female, and have a lower level of education than other workers.
In addition, Beller notes that while the standard minimum wage has been raised several times since 1991, Congress has not in that time ever raised the minimum wage for tipped employees. As a result, the gap between the two wage standards is the largest it has ever been.
Beller also argues that this reliance on tips to reach a minimum wage has led to a fundamental shift in why people tip. Tips were originally seen as a gift given in appreciation of exceptional service, meant to ensure a similar level of service in the future. Beller contends that this explanation makes little sense in modern society, where consumers are not interacting frequently with the same employees. Instead, Beller argues that tipping is driven in part by a consumer’s knowledge that tipped employees are relying on gratuities to earn a suitable income.
Beller notes that a recent wage enforcement operation conducted by the U.S. Department of Labor over the course of two years found that almost 84 percent of restaurants were not properly passing on tips to their employees. He suggests that this problem is compounded at the state level by under-resourced enforcement. Six states, for instance, have zero investigators dedicated to policing minimum wage violators, while 24 others have fewer than ten.
Beller explains that several states have passed laws abolishing the tipped credit system and requiring all employees to be paid a standard minimum wage. Because of the disparities and enforcement difficulties created by sub-minimum wages relying on tips, Beller urges the federal government and other states to follow suit.
