WV Center on Budget and Policy > Blog > Family Economic Security > Tipped Workers Badly Need Wage Increase

Tipped Workers Badly Need Wage Increase

As noted yesterday by the Daily Mail and Gazette, the House of Delegates overwhelming passed a bill (HB 4283) to increase the state’s minimum hourly wage from $7.25 to $8.75 by 2016. As Dave Boucher carefully notes, the bill also increases the minimum wage for tipped workers from $2.13 to $2.63 by 2016. As I will discuss below, increasing the wage for tipped workers is long overdue and much needed! 

Who are tipped workers?

While most of us typically think of tipped workers as waiters at restaurants – and for good reason since that is the case for about 61 percent of tipped workers nationally – they can also include parking lot attendants, hairdressers and hairstylists, barbers, manicurists, bellhops, and poker dealers, to name a few. Nationally, approximately 73 percent of tipped workers are women and 88 percent are at least 20 years old, while nearly half are at least 30.

As our state’s economy has shifted from producing goods to providing services over the last several decades, job growth in industry sectors where most tipped workers are employed has also grown. Since 2001, employment in “food services and drinking places” has grown by over 20 percent  – 45,000 compared to over 54,000 today – while total employment has only grown by 3.7 percent. This sector is also making up a larger share of total employment, growing from 6.6 percent in 2001 to 7.6 percent today.

How does the tipped minimum wage work?

West Virginia’s current minimum wage is $7.25 per hour. West Virginia allows for a 20% credit against the minimum wage requirement for tipped employees. This means employers may pay tipped workers a reduced minimum wage of $5.80 per hour if their hourly rate plus tips equals $7.25 per hour (20% credit is a reduction of $1.45).

However, West Virginia’s minimum wage law exempts virtually all employers from the West Virginia minimum wage provisions. This is because state minimum wage law only covers employers who are not engaged in interstate commerce, or if 80 percent of the employer’s employees are not engaged in interstate commerce activities. In addition, a number of industries, including national restaurant chains, are not covered by the state law. 

Instead, they are covered under the federal minimum wage. The federal tipped minimum wage is $2.13 per hour. Because of the state’s definition of employer, almost all businesses can pay the tipped minimum wage of $2.13, rather than $5.80.

This means West Virginia is essentially one of only 15 states that set the tipped minimum at $2.13. Meanwhile, 20 states have a tipped minimum that is higher than $2.13, including neighboring Ohio. In seven states the tipped minimum is the same as the non-tipped minimum wage.

HB 4283 raises the state minimum wage to $8.75 and strips the interstate commerce definition of employer. It also changes the tipped credit from 20 percent to 70 percent. This, in effect, would raise the state’s tipped minimum wage from $2.13 to $2.63. This increase would still put West Virginia near the bottom in tipped wages.

Meanwhile, the Senate’s minimum wage bill (SB 411), which passed out of the Senate Labor Committee last week, raises the minimum wage to $8.25. It also strips the interstate commerce definition of employer, but keeps the 20% credit, which would increase the tipped wage to $6.60 by 2015.

An increase in the tipped minimum wage is long overdue

The federal tipped minimum wage was overlooked during the past two decades any time Congress raised the federal minimum wage. The federal tipped minimum wage of $2.13 hasn’t been increased since 1991, when it was equal to about 50% of the regular minimum wage of $4.25.  Since then, its value has fallen by 41.5% in real terms, and is now only equal to about 30% of the regular minimum wage. 

Since the tipped minimum wage is so low, only $4,430 per year for a full-time worker, tipped workers are forced to rely almost entirely on tips. This means tipped workers see their paychecks fluctuate widely, creating economic insecurity and frequently leaving workers unable to meet their needs. 

While the House minimum wage bill takes a step in the right direction by increasing the tipped minimum wage by 50 cents, adopting the Senate provision that includes a 20-percent credit would give tipped workers the boost they need to keep up with our changing economy and ensure that the original intent of our tipped waged law worked for all tipped workers.

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