Why tipping leads nowhere

Whether you’re at a restaurant, coffee shop, or using an app on your iPhone, you’ll be asked to tip almost everywhere and for almost everything these days.

It’s one thing to choose not to tip the worker at the checkout at a toy or clothing store, places where workers aren’t typically considered tipped workers, but when you’re dining at a restaurant , tipping isn’t really optional.

Tipped workers who stand behind these payboards feel tip fatigue most acutely. In the second quarter of 2023, tipping at full-service restaurants fell to the lowest level since the beginning of the Covid-19 pandemic.

This is particularly painful for workers in the 16 states that adhere to the federal minimum wage for tipped workers.

Here’s how it works: The federal minimum wage is $7.25 per hour. However, if you are a tipped worker, it is $2.13 per hour, also known as subminimum wage. The difference between the two, $5.12, is called the tip credit. If an employee doesn’t receive a tip of $5.12 per hour, the employer is responsible for paying them the difference – that’s the law.

“Most consumers have no idea that in most states, every tip at a restaurant represents a reduction in the worker’s wages and is not in addition to wages,” said Saru Jayaraman, president of the advocacy group One Fair Wage.

Regard the video above to find out more.