Sarah Gonzalez: It's The Takeaway. I'm Sarah Gonzalez, a host, and reporter with NPR's Planet Money podcast, in for Tanzina Vega, broadcasting from LA this week. Today we start the show talking about dollars and cents, $2.13 to be exact. There's been a lot of focus in recent years on efforts to raise the minimum wage to $15 an hour, but those conversations are almost always centered on raising the standard federal minimum wage which is currently $7.25 an hour unless say you work in a restaurant making tips. In this case, you can be paid as little as $2.13 an hour plus tips. This is what is referred to as the tipped minimum wage. It's been stuck at $2.13 an hour for nearly 30 years.

Today, there are advocates who'd like to see a $15 minimum wage across the board, including for tipped workers by 2027. There are also organizations like the National Restaurant Association that think raising the wage for tipped workers could reduce jobs and hurt businesses that are still struggling to make ends meet as a result of the pandemic. Here's what restaurant workers told us about their experiences with tipped minimum wage.

Barbara: This is Barbara calling from Denton, Texas. I worked as a server and a bartender in a semi-fancy destination restaurant in Tyler area, and I have never worked so hard for so little money in my life. People either didn't tip or they would just leave a few dollar bills behind. This one night, a gentleman bought over $80 of alcohol just for himself. At the end of the night, when he checked out, he left me three, $1 bills.

It was my first time waiting tables and tending bar, but I was really good at it and quite friendly, so I thought surely things would get better, but after three months, I realized I was still averaging only about $5 an hour, so I quit. I now deliver for Domino's and let's just say I do well enough to do it as a third job while I'm getting through grad school.

Cindy: Hi, I'm Cindy calling from Portsmouth, New Hampshire, and I feel like the tipped minimum wage is a no-brainer. Our service industry workers work really hard. It's been a really tough year for our fellow service industry workers and they deserve to be tipped for the work that they do, and they deserve to be paid more than the 7$7.25 minimum wage. Yes, tip those service workers.

Sarah Gonzalez: Reporting from my colleagues at Planet Money also found that the National Restaurant Association has spent more than $50 million on federal lobbying since the '90s in part to fight the minimum wage increase. With me now to break this all down is my colleague Mary Childs, fellow co-host and reporter for NPR's Planet Money. Hey, Mary.

Mary Childs: Hi, Sarah.

Sarah Gonzalez: Technically, even though $2.13 an hour is the federal tipped minimum wage, no one is actually supposed to be taking home just $2.13 an hour. Employers are supposed to make up the difference. How does it work?

Mary Childs: Exactly. You're supposed to stand there and wait tables, say hello to customers, get their orders, and they will tip you at the end and supposedly, you will make more than that minimum wage at the end of the day. They'll tip you 20%, 30%. You'll do so well because they're such a great server. However, that is an idyllic vision and, of course, that doesn't always work out that way. You end up oftentimes just twiddling your thumbs while no customers come in, and you're making that $2.13 minimum wage, hoping that your employer will make up that difference at the end of the day. That, of course, does not always happen. Sometimes employers just don't do it and the recourse for servers and for waiters, what are you supposed to do? Just mention it gently to your boss that you didn't get correctly paid today? It puts them in a pickle.

Sarah Gonzalez: When did this start, the federal tipped minimum wage?

Mary Childs: There have been two different rates since 1966 when President Lyndon Johnson signed this law that created the first tipped minimum wage. This was during the Civil Rights Movement and the war on poverty. Up until then, there was no guarantee whatsoever for most tipped workers. They were in the same bucket as agricultural workers, domestic service workers.

Sarah Gonzalez: This was the workaround. There's a separate minimum wage, but the rule has always been, if you don't make up the difference in tips, your employer is supposed to make up the difference for you.

Mary Childs: No one is really supposed to be making $2.13. This is supposed to just be a backstop where customers make up that difference, and everyone can do really well based on the generosity of customers, but what ends up happening is that it does fall back to employers.

Sarah Gonzalez: Working for tips is not a super steady source of income. Some people obviously get better tips than others. What does the data tell us about who gets better tips depending on say like the race of a server, for example?

Mary Childs: The data are actually pretty stark. There was a study led by Michael Lynn at Cornell university and it showed that white servers got significantly higher tips than Black servers. For instance, for tables of three or more, they found that black servers on average were making 25% less in tips per table. Tips are supposed to increase when you do a better job. For white servers that did happen, but for Black servers, there was no change even if customers rated their service higher than average.

Sarah Gonzalez: The majority of tipped workers are women, according to the National Women's Law Center. What would that change in this way do mean for them?

Mary Childs: This would be huge. As you say, this is a heavily female industry. So many servers and restaurant workers are women. One researcher that we talked to, she found that 90% of female restaurant workers report experiencing sexual harassment on the job. If you think about this, you have a table of really unruly rude customers, but you have to wait on them, and you are reliant on their good graces for your livelihood so you can pay your rent and feed your family, you're going to just grin and bear it and be like like, "Okay." Like, "Thanks so much." That's terrible. There's no consistency, there's no reliability, and you're just hoping to make it through the day with these very unreliable, very volatile, different types of tables.

If you had a reliable wage, if you weren't reliant on tips, so heavily dependent on tips, you could say to your manager, "You know what? This table is giving me a hard time. I would rather be taken off of it. Give it to somebody else." You would have that flexibility because you wouldn't be just having to chance it and hope to get the tips that they leave you at the end.

Sarah Gonzalez: Right, and take it and smile for them because you're relying on that tip. The last time that the tipped wage went up was 1991. How is this possible? How has it not changed at all?

Mary Childs: I know. It's crazy. I think the main reason is really that the National Restaurant Association, which is the leading trade group, the lobbying group, has been vigorously lobbying for this. They say, "It's really hard to run a restaurant, profits are so thin, the economics is tough to make it work. If you raise the wages that we have to pay our employees, we won't [inaudible 00:07:29], et cetera."

The theme there is people don't really know that this isn't working. I think to a large extent, the perception is that you can do really well with tips and people do. That's definitely anecdotally true, but I think these industry workers have a huge reliance on-- in this industry, a lot of workers actually rely on food stamps. Clearly, it's not working for all of the people or even most of the people. This general perception that tips work, and that you can do really well, and that your employer is going to make up the difference anyway if you don't make those tips, it's just not functioning the way it should. I think people don't realize that.

Sarah Gonzalez: The groups that are against this, they say, "This is bad for business. It's going to kill jobs. Restaurants won't be able to stay open." Things like that. In your episode, as a case study, you did look at states that don't follow this low wage for tipped workers. Are these concerns from the restaurant lobby valid? Has the restaurant industry suffered in those states?

Mary Childs: We do have existing case studies like you say because there are seven states that have not had a sub-minimum wage for a long time. That's like Montana, Alaska, California. This economist at UC Berkeley Sylvia Allegretto did a study comparing those restaurant industries in the states with no sub-minimum wage with states that allow this $2.13 system to persist. She basically found that the states that do not have some minimum wage, they grew at a much higher rate than those that did. Where these systems, where they've circumvented the sub-minimum wage, it's actually growing-- the industry is actually doing better or at least it was through 2019.

In these states, you have chains like Olive Garden and big restaurants that function both in those sub-minimum wage states and in the ones that don't have that. They're somehow able to make it work, even though they've claimed for so long that this sub-minimum wage helps them survive and without it, they wouldn't be able to exist. Now, of course, that's a little bit imperfect because again, it's pre-pandemic and maybe the perception of tipping would change and the economics would change. It's not a perfect case study, but it is informative to say like, "Look at California. Are restaurants so devastated there because they have to pay their employees a living wage?" It seems like it's okay.

Sarah Gonzalez: How has the pandemic underscored or what has the pandemic

Sarah Gonzales: underscored about working in a restaurant and being dependent on tips.

Mary Childs: Yes. We already knew, to some extent, but it super underscored the extent to which workers are so reliant on these wages, such that they just can't skip work, even when it's totally life-threatening. I think that's become so acute in the pandemic. You've had so much aggression from customers with their masks, with whether they have to wear a mask or whether their server is wearing a mask. We've heard so much about basically, mask harassment, where you're trying to do your job wearing a mask as dictated by your employer, and in many cases, the government, and your customers are like, "Oh, take off that mask. You look so much cuter. I want to see your smile." That kind of thing.

There's a literal life and death element to that. In order to just get through your job, not only are you bearing the regular old discrimination and harassment, you now have this mask harassment on top of everything. Of course, the restaurant industry has been among the hardest hit in the pandemic, so you've had a lot of people laid off and, shockingly, people tipping less in many cases. I think all of that has filtered through to make it an even tougher landscape.

Sarah Gonzales: President Biden has demonstrated that he is in support of expanding the social safety net. Where does this administration stand in terms of addressing the tipped minimum wage or the federal minimum wage more broadly?

Mary Childs: Yes. This year, Senator Bernie Sanders introduced the Raise the Wage Act, and this was supposed to bring everybody up to that $15 minimum wage across the board. It's not going forward, but there's a lot support throughout Congress, throughout the country, on making some change here. Actually, President Biden signed an executive order on April 27th that required federal contractors to pay that flat $15 minimum wage, but also that eliminates the tipped minimum wage over the next couple of years.

The tipped minimum wage for federal contractors was already a little bit higher, it wasn't that $2.13 an hour, but under the new minimum, they would get $15 an hour which is huge. It's not clear to me just how many people this affects. I don't know how many federal contractors are tipped workers. At the very least, it's a statement saying, they care about this, this is top of mind, and this is what we want to be doing.

Sarah Gonzales: Mary Childs is a reporter and co-host with NPR's Planet Money podcast. Mary, thank you so much for joining us.

Mary Childs: Thank you, Sarah. It was fun.

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