Many “permanent” minimum wage workers actually make $12-$30 an hour

Richard Rider, Chairman, San Diego Tax Fighters Richard Rider, Chairman, San Diego Tax Fighters 10 Comments

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What’s missed in the “minimum wage” brouhaha is that a large segment of those who stay at the minimum wage level actually make $12-$30+ an hour.  That’s because —  in states such as CA — a full minimum wage must be paid to ALL employees — including “tip” employees.  Waiters, busboys, valets, hotel room cleaners, casino employees, etc. make much — often MOST — of their living off tips.

In some other states, these job categories often can be paid a reduced minimum wage — understanding that their total compensation includes tips.  Not so in California.
 http://www.dol.gov/whd/state/tipped.htm

And because these employees make so much in tips, they will NEVER be paid more than the mandated minimum wage. Nor should they be.  After all, “tip” jobs are generaally coveted positions.  There’s no shortage of qualified workers to fill such jobs — when there are openings.

Are these “tip” workers “mired in poverty”? Are they being “exploited”?  I think not!

In California, being a waiter or casino dealer can be a surprisingly desirable job — as more and more college grads with low value liberal arts degrees are discovering.  This results in a “misallocation of labor” — overqualified people holding semi-skilled jobs (okay, dealing IS a skilled job!).  This distortion also “crowds out” job opportunities for folks who normally would qualify for such employment, increasing long term unemployment among the less educated.

A higher minimum wage will only increase this distortion.

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Comments 10

  1. The goal of any wage law should be to provide the worker a guaranteed minimum rate of pay. It should not matter whether that pay comes from the employer in the form of wages or directly from the customer as a tip.

    Reported tips should be counted toward the purpose of fulfilling any minimum wage requirement, period.

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  3. For workers in straight wage jobs who start out at the minimum wage, about 2/3 receive pay raises by the end of the year (assuming they work out as new employees, gaining “soft skills” that make them reliable workers). Among the 2/3 who get a pay increase that first year, the median average salary gain for such workers is 24%.

    The closer to full-time the entry worker is, the better the chances that they will develop skills quicker and receive raises faster. Minimum wage is seldom a permanent compensation position — except for “tip” employees and some part-timers.
    http://www.heritage.org/research/reports/2014/01/most-minimum-wage-jobs-lead-to-better-paying-opportunities

  4. Really, I COVET a Massarati, but that does not make it so, nor is it in my price range. Minimum wage jobs are usually filled (well, SHOULD be filled) by unskilled and semiskilled workers with either no work history, or less than stellar history. For them, a $30,000+ job is a challenging goal — STARTING with a minimum wage job. So a LOT of folks are ready, willing and able to take a “tip” job. The competition for the better positions can be fierce.

    Most people don’t realize that in some restaurants, a good waiter can make $60,000 — even $80,000+ a year. And regardless of one’s compensation, it’s always nice to “forget” to report 40% or more of these tips to the tax man, greatly increasing the take home income — and putting far less income in the “coveted” 35% tax bracket.

  5. For others in straight wage jobs (no tips) who start out at the minimum wage, about 2/3 receive pay raises by the end of the year (assuming they work out as new employees, gaining “soft skills” that make them reliable workers). Among the 2/3 who get a pay increase that first year, the median average salary gain for such workers is 24%.

    The closer to full-time the entry worker is, the better the chances that they will develop skills quicker and receive raises faster. Minimum wage is seldom a permanent compensation position — except for “tip” employees and some part-timers.
    http://www.heritage.org/research/reports/2014/01/most-minimum-wage-jobs-lead-to-better-paying-opportunities

  6. If you covet a Maserati, then stop whining about how much money the working poor are allegedly making and become a “waiter making $80K+ a year”. Oh, right. Such jobs are virtually nonexistent. The average food service employee doesn’t make 1/4 of that.

    For God’s sake, are you really offended by the working poor underreporting their tips while the upper class and wealthy avail themselves of innumerable tax loopholes?

    Someone missed the class on compassionate conservatism.

  7. Really — The “average food service employee” receives zero tips — working in fast food restaurants. I’m talking about those who DO receive tips — but then, you know that — you just choose to ignore it.

    I’m not “offended” by those who don’t report tips as income — it’s just a perk that most such statistical comparisons ignore. And all such facts should be considered before we raise the minimum wage for tip employees (actually too late — we already did!).

    Someone missed the class on reasoning.

  8. We do not need a separate (lower) minimum wage for tipped employees. We simply have to count reported tips as wages. In other words, if an employee receives more than the minimum wage in reported tips during any pay period, then the employer would not be required to provide additional pay.

  9. Clearly I’m referring to those in the food service industry who receive tips – that is the topic of our discussion, so trying to deflect the subject is unavailing.

    More troublesome is your suggestion that public policy should be based on an assumption that the poorest among us are cheating on their taxes. By that logic, we should tax the rich at 100%, and trust them to lie and cheat themselves to a rational tax bracket. How unreasonable.

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