The Truth About $2.13

The one irrefutable fact which restaurant lobbyists seem intent on ignoring is that in the eight states, including California, which do not have tipped penalties on restaurant workers, the restaurant industry is thriving.
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"Sometimes I feel like I'm taking crazy pills!"

I think often of this quote from the 2001 movie, Zoolander, where Will Ferrell's character is exasperated that everyone in the fashion industry can't see that Ben Stiller's character is a one-trick pony. It's exactly how I feel every time I hear the latest "higher wages kill jobs" argument from one of the restaurant industry's hired guns.

Now the rhetoric is about to get even more heated. Last week, Sen. Tom Harkin (D-IA) introduced the "Rebuild America Act," which would raise the federal tipped minimum wage, which has been stuck for over twenty years at $2.13 an hour. Expect to hear howls of wage rage early and often from the restaurant industry and their well-paid lobbyists at the National Restaurant Association, as they describe an industry that simply does not exist.

Here are some facts about the minimum wage and the restaurant industry. First, the federal subminimum wage for tipped workers has been frozen at $2.13 since 1991! This law allows a $5.12 tip penalty, i.e., employers are allowed to penalize workers up to $5.12 per hour for receiving tips. The tipped minimum wage especially impacts restaurant workers, who make up the overwhelming majority of tipped workers.

Not surprisingly, in states where the tipped minimum wage is $2.13, twenty percent of servers live in poverty -- a rate that's three times higher than the overall population. However, in states that have abolished the tip penalty, the server poverty rate drops by 43 percent.

Women make up two-thirds of tipped workers, but female servers are paid only 70 percent of male servers' pay. With such dismally low wages, this pay gap can mean the difference between living above or slipping below the poverty line.

Many of these facts are detailed in a recent report by the organization I lead, Restaurant Opportunities Center, entitled "Tipped Over the Edge: Gender Inequity in the Restaurant Industry," which we released on National Tipped Worker Day, February 13th. The report is based on extensive analysis of US Census and Bureau of Labor Statistics data, as well as over over 4,300 surveys and 480 interviews of restaurant workers and employers in eight cities across the country. It details the realities of the restaurant industry for women. Because of the tip penalty, many servers see paychecks of only a few dollars due to taxes on their wages and tips. ROC surveyed restaurant workers nationwide and found pervasive employer intimidation, forcing workers to inflate their tips in order to save employers from having to make up the difference of the tip penalty.

The one irrefutable fact which restaurant lobbyists seem intent on ignoring is that in the eight states, including California, which do not have tipped penalties, the restaurant industry is thriving. Or the fact that the majority of states have tipped penalties higher than the federal minimum, though most are less than a dollar more. In none of these states is the restaurant industry in dire straits. In reality the industry is booming, with projections of a 14 percent boost in revenue to record high profits of close to $700 billion, even in the economic downturn.

The sad reality is that much of those profits are taken directly out of the paychecks of the workers who make the industry successful. These workers raise families, work hard and help provide an important service to American families. They deserve a raise. Industry apologists are one-trick ponies, perpetually arguing that any rise in the minimum wage will destroy the industry while pushing dubious assertions about a world restaurant workers do not recognize. Sen. Harkin has done something that is long overdue -- two decades overdue. If there is anything we should all be able to agree on, it's that in 2012, no one should be paid $2.13.

A version of this piece originally appeared in The Hill online, March 30th. For more on the campaign to raise the tipped minimum wage, visit

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