The Economics of Tipping
Tipped Wages and the Minimum Wage
In some countries, employers pay tipped workers a low base wage on the assumption that tips make up the difference, an arrangement that shifts risk onto workers.
Pay depends on customers.
US system
The federal cash wage for tipped workers is $2.13 an hour, with employers required to top up if tips fall short.
Risk
Income varies with season, location and customers’ moods.
Effects
Workers may put up with poor treatment to protect tips.
Reform
Some cities and states have moved to full minimum wages for tipped workers.
A slow week
A server earns much less during a quiet winter season.
Assuming tips always raise incomes
They can be unreliable.
Key takeaways
- Base wages can be very low.
- Income is uncertain.
- Workers may tolerate poor treatment.
- Some places have reformed.
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