Mel Nichols, a 37-year-old bartender from Phoenix, Arizona, takes home anywhere from $30 to $50 an hour, including tips. But the uncertainty about how much she will earn each day is a constant source of stress.
“For every good day there are three bad days,” says Nichols, who has worked in the service industry since she was a teenager. “You have no certainty if you know how much you will earn.”
That uncertainty exists largely because federal labor law allows companies to pay tipped workers, such as food servers, bartenders and bellhops, less than the minimum wage as long as customer tips make up the difference. Voters in Arizona and Massachusetts will decide in November whether it is good policy to let employers pass on some of their labor costs to consumers.
The ballot measures reflect an accelerating debate over the so-called subminimum wage, which proponents say is essential to the sustainability of the service sector, while opponents say it pushes labor costs off the shoulders of employers and leads to the exploitation of workers.
The amount employees receive varies by state. Fourteen states pay the federal minimum, or just over $2 per hour for tipped workers and $7 per hour for non-tipped workers.
Arizona employers can pay their tipped employees $3 less per hour than other employees. Under current rates, that means the base wage for tipped employees is $11.35 per hour.
Voters will decide whether to approve a measure backed by Republicans and the Arizona Restaurant Association to change the minimum for tipped workers to 25% less than the regular minimum wage, as long as their tipped wages are $2 above that minimum .
The minimum hourly wage in Arizona is currently $14.35 and increases annually depending on inflation.
Voters in Massachusetts are being asked to abolish the tiered minimum wage system.
There, voters will decide on a measure to incrementally increase the state’s tipped wage — currently $6.75 an hour — until it meets the regular minimum wage by January 2029. The measure was proposed by One Fair Wage, a nonprofit organization working to end the subminimum wage.
If voters approve the measure, the Bay State would join seven states that currently have one minimum wage. Michigan will soon join that group after a August State Supreme Court ruling started the gradual abolition of the subminimum wage.
“If you’re not making the money you should be making to pay your bills, things are going to be tough for you,” says James Ford, a longtime Detroit hospitality worker. “(The ruling) makes me think we are making progress.”
Other states have wage measures on the ballot. In California, voters will choose whether they want that Increase the minimum hourly wage from $16 to $18 by 2026, which would be the highest statewide minimum wage in the country. Measures in Alaska and Missouri would gradually raise the minimum wage to $15 an hour, while also requiring paid sick leave.
Over the past two years, Washington, DC and Chicago have also started eliminating the subminimum wage.
Employers should ensure that employees are paid the full minimum if they don’t make that much from tips. But they don’t always comply with federal labor laws. One in 10 restaurants and bars investigated nationwide by the U.S. Department of Labor between 2010 and 2019 violated a provision of the Fair Labor Standards Act, causing the establishments to pay $113.9 million in back wages.
According to an AP analysis of U.S. Census data, the problem disproportionately affects women, who make up about 47% of the U.S. workforce but nearly 70% of those who work in tipped occupations.
In Arizona, Republican Sen. JD Mesnard, the sponsor of Proposition 138, said the measure is a win for both businesses and lower-wage workers.
“The employer is protected in the sense that he can maintain this lower base knowing that there will be tips on top of that,” Mesnard said. “The tipped worker is guaranteed to earn more than the minimum wage, which is more than is currently guaranteed.”
Nichols doesn’t support it.
“It would lower my hourly wage, and anything that lowers my hourly wage is not something I want to lean on,” she said. “I don’t believe business owners need any more cuts in labor costs.”
Proposition 138 was initially floated in response to a ballot measure from One Fair Wage that would create a single $18 minimum wage, but the group abandoned the effort after threats of lawsuits from the restaurant association over how it collected signatures.
Instead, One Fair Wage will focus on efforts to pass a wage increase in the Legislature. Democratic State Rep. Mariana Sandoval said she hopes her party can flip the Legislature in November, where Republicans have one-seat majorities in both chambers.
After working for tips for more than two decades, server Lindsay Ruck, who works at a restaurant at Phoenix Sky Harbor International Airport, said she has dealt with her fair share of belligerent customers. But because their tips make up such a significant portion of her paycheck (about $60 an hour), she’s hesitant to fight them.
Ruck needs a higher base salary, not less.
“I think there should be one minimum wage and people should be tipped on top of that,” Ruck said.
The National Restaurant Association and its state affiliates warn of fewer hours, fewer jobs and higher menu prices if employers can’t rely on tips to pay their workers. That’s why Dan Piacquadio, co-owner of Harold’s Cave Creek Corral restaurant outside Phoenix, hopes voters will pass Proposition 138.
“This is just a way to protect our current system that has been in place for 20 years and protect restaurant owners, keep restaurants affordable and, most importantly, keep very good wages for all tipped workers,” Piacquadio said .
According to labor economist Sylvia Allegretto, between 2012 and 2019, the number of restaurants and the number of people working at those restaurants grew faster in the seven states that have a single minimum wage, compared to states that pay the federal minimum wage.
“We’re in a state here with a $16 minimum wage,” Allegretto said from Oakland, California, where she works at the left-leaning Center for Economic and Policy Research. “No subminimum wages, and we have a thriving restaurant industry.”