Tipping Infographic Part 1: The History of Subminimum Wage

New York employment attorneys are keeping a close watch on the changing laws and trends in our country. According to the Bureau of Labor Statistics, over 2.3 million servers currently work in the United States, many of whom depend on tips for their livelihood. Consumers pay $42 billion in tips to servers every year, but many people know little about where their money goes.
This excellent infographic from Accounting Degree Review provides valuable information for tipped employees (and their customers) about the history and current state of compensation for servers.

Equity Theory and Tipping

People often think of tipping as an “extra” for the server, but in actuality, many employees earn an extremely low hourly wage that requires supplementation. However, the current socio-economic system of tipping is such that it doesn’t always work the way it should. The result is often severely underpaid workers.

This infographic describes the complex social contract that goes into tipping by explaining it in terms of Equity theory. “Inputs” such as effort, skill, flexibility, and determination balance with “outputs” such as salary, benefits, praise, reputation, and growth to create a relationship of reciprocity among the employer, the server, and the customer. However, the current socially-accepted norm of 15-20 percent tips has been imposed arbitrarily and doesn’t reflect Equity theory.

The Evolution of Subminimum Wage

Before 1960, employers didn’t have to pay their tipped employees anything other than the tips they received. The subminimum wage was created specifically for workers who subsisted on tips. The infographic provides a concise timeline of the subminimum wage, condensed thus:

1960: Subminimum wage established at $.50, 50% of minimum wage
1979: Raised to $1.60, 55% of minimum wage
1980: Increased to $1.86, 60% of minimum wage
1990: Raised to $2.09, 55% of minimum wage
1991: $2.13, 50% of minimum wage
1996: National Restaurant Association lobbies to keep subminimum wage at $2.13 in exchange for an increase in the federal minimum wage
2014: Subminimum wage remains $2.13, a paltry 29% of minimum wage
Although subminimum wage began as a “huge leap toward wage equality,” its benefit to tipped employees has decreased over time and can increase workers’ vulnerability to employer abuse. In our next post, we will discuss the infographic’s depiction of the current state of tipped labor and list ways tipped employees can help servers advocate for themselves in possible disputes.

If you think your employer may be violating compensation regulations, New York employment attorneys at Joseph & Kirschenbaum can help. Call us today at (212) 688-5640 for more information.