With Americans resuming pre-pandemic habits of going out, eating out and traveling, leisure and hospitality businesses have scrambled to hire, sometimes offering pay increases that outpace inflation. But for many whose pay is linked to tips, like restaurant servers and bartenders, base wages remain low, and collecting what is owed under the law can be a struggle, the New York Times reported. In all but eight states, employers can legally choose to pay workers who receive tips a “subminimum” wage — in some places as low as $2.13 an hour — as long as tips bring their earnings to the equivalent of the minimum wage in a pay period. Economists estimate that at least 5.5 million workers are paid on that basis. The provision, known as the tip credit, is a unique industry subsidy that lets employers meet pay requirements more cheaply. And even in a tight labor market, it is often abused at the employees’ expense, according to workers, labor lawyers, many regulators and economists. “It’s baked into the model,” said David Weil, the administrator of the Wage and Hour Division of the Labor Department under President Barack Obama, referring to the frequency of violations. “And it’s very problematic.” In the District of Columbia, a measure on the November ballot would ban the subminimum wage by 2027. A ballot proposal in Portland, Maine, would ban subminimum base pay and bring the regular minimum wage to $18 an hour over three years. Employers in Michigan are bracing for increased expenses in February, when the state tipped minimum of $3.75 an hour is set to be discontinued and the regular state minimum wage will rise to $12 from $9.87.
