Many of us look forward to the happy hour at our local bar. After a long day in the office a half priced appetizer or $5 glass of wine helps us all unwind. However, many times it is not a happy hour for the bartenders and restaurant servers who are mixing our drinks and delivering our nachos. While bar patrons may be able to take advantage of discounted food and drinks, the restaurant workers often see their tips cut down significantly during happy hour. These workers are tipped based on the food and drink prices, and when those prices are discounted—because of happy hour specials or restaurant coupons— their tip is discounted too. Restaurant workers often report that in these situations customers tend to order twice as much food and drink, work the bartenders and servers twice as hard, and then tip based on the discounted food. And since tips are the bulk of bartenders’ and servers’ income, these discounts are impacting their economic security.
Of course there are ways to try to address this issue. Many people point to better educating customers on “tipping etiquette”—that on discounted meals and drinks once should tip on the pre-discounted prices. Others suggest that restaurants could include automatic gratuity on the customers’ checks that is based on the full check amount. All good ideas, but these may be much more of a “band aid” solution, instead of a long term strategy to help restaurant workers achieve economic security. When one is working on tips, a bartender or server is completely dependent on the ebb and flow of customer traffic, along with the customer’s ability and desire to tip for service. This combination is a recipe not for a tasty margarita but instead for high levels of economic insecurity.
The reality is that American restaurant workers earn a minimum wage of $2.13 per hour, a minimum wage that has not changed for over twenty years. The wage is so low, that often restaurant workers receive a zeroed out paycheck at the end of the week because once taxes are taken out of the hourly pay, there is nothing left. So tips are what they are living on to pay their rent, keep their electricity turned on and put gas in their cars. And while it is customary for customers to tip 15 to 20% of the total bill, there is no way for a worker to enforce this. So when customers don’t tip, or the restaurant isn’t busy, the restaurant worker is not earning any income. In fact living on tips is so bad that restaurant workers use food stamps at twice the rate of the US workforce. The irony here is clear—those that serve us our meals and drinks cannot afford to feed themselves and their families.
Restaurant workers need more stability in their wages. Raising the tipped minimum wage is a way to help restaurant workers move toward economic security. The Fair Minimum Wage Act of 2013, introduced by Sen. Tom Harkin (D-IA) and Rep. Miller (D-CA) earlier this year, includes an increase in the tipped minimum wage to 70% of the federal minimum wage. Further the tipped minimum wage will also automatically increase when the federal minimum wage increases. And the first time, link the minimum wage to inflation and raise it along with increases in the cost of living.
As Figure 1 shows, passage of the Fair Minimum Wage Act will enable a single tipped worker to earn $10,000 more per year by raising the tipped wage. And this will help women who are 71% of employees in the service industry, the largest group of tipped workers.
So while customers may be able to take advantage of discounted drinks and food at happy hour, the bartenders and servers cannot take advantage of discounted rents, health care or grocery bills. Providing tipped workers with a stable base wage by raising the minimum wage can go a long way in helping protect them from the extreme economic insecurity that results from solely living off tips. And doing so would give us all something to celebrate at happy hour!