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TIPPING IS A RACIST RELIC AND A MODERN TOOL OF ECONOMIC OPPRESSION IN
THE SOUTH  
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_ Rooted in Racism and Economic Exploitation: This spotlight details
the racist history of tipping, federal and state policy governing
tipped work, and the experience of tipped workers in the
economy—both nationwide and in the South. _

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_SUMMARY: This spotlight details the racist history of tipping,
federal and state policy governing tipped work, and the experience of
tipped workers in the economy—both nationwide and in the South.
Across the country, tipped workers are more likely to be people of
color, women, women of color, or single parents, and are
disproportionately born outside of the United States. Tipped workers
earn low wages, experience high rates of poverty, and are vulnerable
to exploitation in the workplace—particularly in the form of wage
theft and sexual harassment. The South has the largest tipped
workforce of any region.  Tipped workers in the South are paid the
second lowest median wage of any region, and most Southern states
allow employers to pay tipped workers as little as $2.13 an hour.
Hispanic workers in the South are overrepresented in tipped work, as
are women—who account for 70% of the tipped workforce despite making
up less than half of all workers in the region._

The racist origins of tipping and the tipped minimum wage

In most of the country, workers in restaurants, bars, nail salons,
barber shops, and various other service jobs are paid differently than
workers in virtually all other occupations. For these workers, a large
portion (in many cases all) of their take-home pay comes from gratuity
or “tips” provided directly from the customer. While employers of
workers in nearly all other occupations must pay at least the minimum
wage, federal and most states’ laws establish a lower “subminimum
wage” for tipped workers that effectively passes the responsibility
for compensating these workers from their employers to their
clientele.

This subminimum wage in the United States is a uniquely American
institution that is rooted in the exploitation of formerly enslaved
Black workers following emancipation. Tipping in the U.S. originated
in the antebellum period. Wealthy Americans vacationing in Europe got
a taste of the aristocratic—including the continent’s medieval
tradition of giving servants extra money for particularly good
service—and brought the practice of tipping back home with them.
Though tipping was initially unpopular in the United States and
quickly eliminated in Europe, the practice persisted in the U.S. as
racial hostility and discrimination allowed employers to codify the
practice (Greenspan 2018).

Following the Civil War and the abolition of slavery, formerly
enslaved Black workers were often relegated to service jobs (e.g.,
food service workers and railroad porters). However, instead of paying
Black workers any wage at all, employers suggested that guests offer
Black workers a small tip for their services. Thus, the use of tipping
to pay a worker’s base wage, instead of as a bonus on top of
employer-paid wages, became an increasingly common practice for
service sector employment. In the early 20th century, these employers,
who shared a common goal of keeping labor costs down and preventing
worker organizing, formed the National Restaurant Association (NRA).
Over the past century, the NRA has lobbied Congress to achieve these
goals, first by excluding tipped occupations from minimum wage
protections entirely, and later by establishing permanent subminimum
wages for tipped workers (One Fair Wage 2021).

The 1938 Fair Labor Standards Act (FLSA) and its subsequent amendments
further enshrined this discriminatory treatment of tipped workers.
Though the FLSA is known for having established fundamental worker
protections—including the 40-hour workweek, overtime protection, and
a national minimum wage—the law initially excluded protections for
hotel, restaurant, and other service workers. Proponents of the FLSA
deliberately excluded industries that were the predominant employers
of Black Americans as a means of securing needed support of Southern
Democrats in Congress (Dixon 2021). These gaping holes in the FLSA’s
protections persisted for roughly 30 years, until the mid-1960s, when
the FLSA was amended to extend coverage to service sector workers.

However, while service workers in restaurants, hotels, bars, and
elsewhere would now be covered under the law, the 1966 amendments to
the FLSA created a “tip credit.” The tip credit allowed employers
to count the tips received by their staff against 50% of the minimum
wage they were required to pay—effectively establishing a separate
“tipped minimum wage” set at half the regular minimum wage.
Subsequent amendments to the FLSA adjusted the level of the tipped
minimum wage to varying percentages of the regular minimum wage,
reaching as high as 60% in the 1980s. In 1996, the FLSA was amended
again to raise the federal minimum wage from $4.25 to $5.15. However,
the bipartisan deal that was struck in Congress to achieve this
increase decoupled the tipped minimum wage from the regular minimum
wage. The deal locked the tipped minimum wage statutorily at $2.13 per
hour (50% of $4.25), the level at which it had been set in 1991
(Allegretto and Cooper 2014).

The tipped minimum wage today and its impacts on workers

The federal minimum wage has been stuck at $7.25 since 2009, while the
tipped minimum wage remains $2.13 per hour. As a result, employers of
tipped workers can rely on customers to pay $5.12 per hour—roughly
70%—of the business’ wage obligation to tipped staff. Even as most
states have now enacted minimum wages above the federal $7.25 per
hour, many still maintain exceptionally low tipped minimum wages. For
instance, in Delaware, Nebraska, and Rhode Island, the regular state
minimum wage is scheduled to reach $15 per hour in the coming years,
yet the tipped minimum wage in each of these states remains less than
$4 per hour.

Many states have established slightly higher minimum wages for tipped
workers, and seven states have eliminated the tip credit system
altogether; in these states, tipped workers receive the full minimum
wage plus tips. In 2022, voters in the District of Columbia approved a
ballot measure to gradually raise the tipped minimum wage until it is
equal to the regular minimum wage. The tipped minimum wage will be
fully eliminated in D.C. by 2027. However, most Southern
states—excluding Arkansas, Delaware, Florida, Maryland, West
Virginia, and D.C.—employ the maximum allowable tip credit, meaning
employers are expected to pay only about a third of workers’ wage
obligation ($2.13 per hour) and expect them to make up the rest of
their income in tips (EPI 2023).

Relying on customers to pay the bulk of tipped workers’ wages
exposes workers to tremendous instability of income, as pay can vary
dramatically day-to-day and week-to-week. Employers are legally
required to ensure that on a weekly basis, tipped workers’ tips (the
“tip credit”) cover the gap between the tipped minimum wage and
the regular minimum wage for the total hours worked that week. If they
do not, employers are responsible for making up the difference. In
practice, this requirement is exceptionally difficult to enforce, as
it is largely left to workers themselves to track their hours and
tips, make the relevant calculations, and then confront their employer
if something seems amiss. As a result, tipped workers—who are
already paid low wages—are particularly vulnerable to wage theft
(Cooper and Kroeger 2017).

Tipped workers are more likely to live in poverty than non-tipped
workers

Across the U.S., poverty rates for tipped workers are 2.3 times as
high as poverty rates for non-tipped workers (11.3% vs. 4.9%) (EPI
analysis of Ruggles et al. 2024). The South has the highest regional
share of tipped workers living in poverty (12.7%), tied with the
Midwest (see FIGURE A and APPENDIX TABLE 2). According to a 2021
analysis of poverty rates across states with different tipped minimum
wages, states that pay the lowest tipped minimum wage allowed by law
($2.13 per hour) have the highest poverty rates among _all _workers,
but especially among tipped workers. Schweitzer (2021) finds that, in
states where the tipped minimum wage is $2.13 per hour, 13.8% of
workers in key tipped industries are in poverty, compared with 10.2%
in states where tipped workers are paid the full minimum wage. For
tipped workers, specifically, poverty rates are 14.8% in $2.13 per
hour tipped minimum wage states, compared with 11% in states that have
eliminated the tipped minimum wage (Schweitzer 2021).

Of the 16 states and D.C. that comprise the South, 11 have a $2.13 per
hour tipped minimum wage, the most of any region. Consequently, the
inequity and disparate treatment inherent in the two-tiered tipped
minimum wage system is particularly acute in the South—and most
Southern tipped workers are operating under the lowest possible tipped
standards. The workforce in these 11 states accounts for almost
three-quarters (72.6%) of the overall Southern workforce and
two-thirds (66.5%) of tipped workers in the South.

Tipped workers have lower wages than non-tipped workers

Tipped workers in the South earn a median wage of $15.13. The median
hourly wage for tipped workers is $8.50 less than the typical
worker’s wage ($23.64) in the South in 2023 (BLS 2023). Tipped
workers are also less likely to have access to benefits such as paid
sick leave, health care, short-term disability, life insurance, and
paid vacation. Given their low wages, lack of benefits, and high
poverty rates, it is not surprising that tipped workers rely on public
assistance programs at higher rates than the overall workforce
(Allegretto and Cooper 2014).

Demographics of the tipped workforce

Compared with their share of the overall workforce in the U.S.,
Hispanic, Asian-American and Pacific Islander (AAPI), foreign-born,
and women workers are overrepresented in the tipped workforce, while
white workers and men are underrepresented (see TABLE 1). The tipped
workforce nationwide is nearly two-thirds women, and
disproportionately composed of women of color. Tipped workers are also
more likely to be single parents—especially women workers.

The highest concentration of tipped workers is in the restaurant
industry (Allegretto and Cooper 2014). Women restaurant workers are
subject to the highest rates of sexual harassment of any
industry—nearly three-quarters (71%) of women reported having been
sexually harassed at some point during their time in the restaurant
industry, and the rate of sexual harassment is much higher among
tipped women workers (76%) compared with non-tipped women workers
(52%). Tipped workers are more likely to experience sexual harassment
in states that pay a subminimum wage; the more dependent workers are
on customers to pay their wages, the more they are forced to tolerate
abusive behavior from customers (Mackinnon and Fitzgerald 2021).

In the South, the tipped workforce is 70.6% women, 22.7% Hispanic,
and 17.3% Black—the highest share of Black tipped workers of any
region (see TABLE 1). The South also has the highest share of
Black workers generally, and the largest population of tipped
workers of any region—over one million workers (see APPENDIX TABLE
1). The South is home to four out of every 11 (36%) tipped workers
nationwide (see FIGURE B). Given that the South is home to the
largest tipped workforce and the largest Black population of any
region, the subminimum wage has a disparate impact on Black workers in
the South, even if Black workers are slightly underrepresented in
tipped work based on their population share of the South (19%).

Meanwhile, AAPI workers are overrepresented in tipped work in the
South (10.6% of tipped workers vs. 4.8% of all workers in the region),
alongside Hispanic workers (22.7% vs. 19.1%), foreign-born workers
(21.5% vs. 17.1%), and women (70.6% vs. 47.0%). Over one–fifth of
tipped workers in the South (21.5%) were born outside the United
States, and the South has the second highest share of women working
for tips. White workers and men are underrepresented in tipped work
in the South (see FIGURE C). Nationwide, AAPI, Hispanic, and
multiracial workers are overrepresented in tipped work, though AAPI
workers are overrepresented at the highest rates of any race/ethnicity
group.

The disproportionate harm of this separate and unequal treatment of
tipped workers—rooted in anti-Black racism—persists across the
country, and while it may have originated as a means of subjugating
Black workers in particular, its harms are now falling
disproportionately on workers of color more broadly.

Median wages among tipped workers

The South has the second lowest median wage for tipped workers (after
the Midwest)—$15.13 per hour, inclusive of base wages paid by
employers and tips. FIGURE D shows that in every region, including
in the South, tipped workers are paid at least a third less than the
median worker overall—which translates to over $9 less nationwide.

The tipped minimum wage and efforts to block its elimination are
representative of the Southern economic model

Though the subminimum wage for tipped work prevails across the
country, and especially in the South, seven non-Southern states have
already eliminated the subminimum wage (Alaska, California, Minnesota,
Montana, Nevada, Oregon, and Washington). In the South, D.C.
eliminated the subminimum wage through the ballot initiative process
in November 2022. In 2024, legislation to eliminate the tipped minimum
wage has been introduced in Connecticut, Illinois, and Maryland, and
several other states are considering ballot measures.

In the South, efforts to change tipped wage policy often are stymied
by political opposition in state capitals that not only oppose
changing state minimum wage policy, but actively subvert local
governments’ ability to respond themselves. In the mid-2010s, in the
absence of state or federal action to raise the minimum wage, several
localities in the South—such as Birmingham, AL, an overwhelmingly
Black city—attempted to implement their own higher minimum wages.
However, these ordinances were subsequently blocked by majority-white
state legislatures seeking to maintain the system of economic
subjugation that ensures their political power (Blair, Cooper, Wolfe,
and Worker 2020).

From emancipation, the racist practice of tipping prevailed in
low-wage industries—disproportionately composed of Black workers,
workers of color, and women—before subminimum wages were enshrined
into law, creating a two-tiered system for wages that has been
preserved as a means of racial and economic control. The tipped
minimum wage system perfectly encapsulates the Southern economic
model, which systematically favors corporate interests at the expense
of working people and uses anti-democratic means to entrench white
supremacy (Childers 2024). To address the discriminatory treatment
of tipped workers in the South and across the country, lawmakers
must eliminate the tipped subminimum wage and give tipped workers
the same basic protection afforded to other workers in almost
all other jobs—a minimum hourly wage, regardless of tips. State
lawmakers should also reverse harmful state preemption
of local labor ordinances that would allow cities and counties to
set higher minimum wages.  

Appendix

References

Allegretto, Sylvia, and David Cooper. 2014. _Twenty-Three Years and
Still Waiting for Change: Why It’s Time to Give Tipped Workers the
Regular Minimum Wage_
[[link removed]].
Economic Policy Institute, July 2014.

Banerjee, Asha, Elise Gould, and Marokey Sawo. 2021. _Setting Higher
Wages for Child Care and Home Health Care Workers is Long Overdue._
[[link removed]] Economic
Policy Institute, November 2021.

Blair, Hunter, David Cooper, Julia Wolfe, and Jaimie Worker.
2020. _Preempting Progress: State Interference in Local Policymaking
Prevents People of Color, Women, and Low-Income Workers from Making
Ends Meet in the South_
[[link removed]]. Economic
Policy Institute, September 2020.

Bureau of Labor Statistics (BLS). Current Population Survey Basic
Monthly microdata (U.S. Census Bureau CPS Basic). 2015–2019. Public
data series accessed through the CPS Databases and through series
reports. Accessed October 2023.

Bureau of Labor Statistics (BLS). Current Population Survey Outgoing
Rotation Group microdata (U.S. Census Bureau CPS-ORG). 2015–2019.
Public data series accessed through the CPS Databases and through
series reports. Accessed October 2023.

Childers, Chandra. 2024. _The Evolution of the Southern Economic
Development Strategy_
[[link removed]]. Economic
Policy Institute, May 2024.

Cooper, David and Teresa Kroeger. 2017. _Employers Steal Billions
from Workers’ Paychecks Each Year
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Economic Policy Institute, May 2017.

Dixon, Rebecca. 2021. _From Excluded to Essential: Tracing the Racist
Exclusion of Farmworkers, Domestic Workers, and Tipped Workers from
the Fair Labor Standards Act_
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National Employment Law Project, May 2021.

Economic Policy Institute. 2023. _Minimum Wage Tracker_
[[link removed]]. Updated March 2024.

Greenspan, Rachel. 2018. “’It’s the Legacy of Slavery’:
Here’s the Troubling History Behind Tipping Practices in the U.S.
[[link removed]]” _TIME_,
October 15, 2018.

Mackinnon, Catharine A., and Louise F. Fitzgerald. 2021. _The Tipping
Point How the Subminimum Wage Keeps Incomes Low and Harassment High_
[[link removed]].
One Fair Wage and UC Berkeley Food Labor Research Center, March 2021.

One Fair Wage. 2021. _The Other NRA Exposed: The National Restaurant
Association’s Duplicitous Lobbying, Perpetuation of Race and Gender
Inequity, and Support for Insurrectionists_
[[link removed]].
One Fair Wage and UC Berkeley Food Labor Research Center, April 2021.

Ruggles, Steven, Sarah Flood, Matthew Sobek, Daniel Backman, Annie
Chen, Grace Cooper, Stephanie Richards, Renae Rodgers, and Megan
Schouweiler. IPUMS USA: Version 15.0
[[link removed]] . Minneapolis, MN: IPUMS,
2024. [link removed]

Schweitzer, Justin. 2021. _Ending the Tipped Minimum Wage Will Reduce
Poverty and Inequality: One Fair Wage States Are Better for Workers in
Tipped Industries_
[[link removed]].
Center for American Progress, March 2021.

See related work on Program on Race, Ethnicity and the Economy (PREE)
[[link removed]] | Minimum Wage
[[link removed]] | Women
[[link removed]] | Tipped minimum wage
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See more work by Nina Mast [[link removed]]

NINA MAST (she/they) joined EPI in 2022 as an economic analyst on the
State Policy and Research team. Mast’s research at EPI includes a
focus on child labor standards.  Mast is a graduate of the Master of
Public Policy program at UC Berkeley’s Goldman School, where she
served as a researcher for the UC Berkeley Labor Center and
represented academic student employees as a union steward with
UAW-2865.

Mast has been interviewed or quoted by numerous outlets including ABC
News, NBC News, The New York Times, The Wall Street Journal, The
Washington Post, CNN, and The New Yorker, and appeared on American
Public Media for “Marketplace” and the popular “Pitchfork
Economics” podcast. 

Before graduate school, Mast worked as a researcher in the labor
movement and at issue advocacy organizations focused on health care
and the economy. At SEIU Local 32BJ, she conducted research to support
fast-food workers in Connecticut and commercial cleaning workers in
New York. Prior to 32BJ, she worked on issue campaigns at The Hub
Project and efforts to advance a progressive economic worldview at the
Groundwork Collaborative.

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* economics
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* Inequality
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* Racism
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* tipping
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* the South
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