Tipped Workers’ Baseline Pay Is as Little as $2.13 an Hour, New Move to Raise it

John Reitmeyer | October 31, 2018 | Budget
Amid broader concerns about income inequality in New Jersey, effort to ensure tipped workers will be in line for a significant raise if general minimum wage is increased

Overlooked in the ongoing discussions about raising the minimum wage to $15 in New Jersey has been the fate of thousands of workers who rely on tips to make ends meet.

Bartenders, waiters and waitresses, and other so-called tipped workers can do quite well when the tips are flowing in from generous customers. But the unique system under which they are typically paid can at times leave them like other workers, struggling to get by in a high-cost state like New Jersey; some can even end up needing food stamps and other government assistance, advocates say.

Amid broader concerns about the state’s high rates of poverty and income inequality, some lawmakers are now mounting an effort to ensure that tipped workers will be in line for a significant raise if the general minimum wage is increased. To accomplish that goal, a state Assembly bill that first sought to increase the special — and much lower — minimum wage paid to tipped workers is now being reworked by its sponsors to have them fall instead under the state’s general minimum hourly wage, now set at $8.60.

Credit: NJ Assembly Democrats
Assemblywoman Shavonda Sumter (D-Passaic), second from right, explains the need to raise wages for tipped workers.
“These workers are people with jobs, people that are working hard,” said Assemblywoman Shavonda Sumter (D-Passaic), one of the sponsors of the measure.

The new focus on boosting pay for tipped workers was widely praised by groups that for years have been pressing lawmakers to increase the minimum wage as an economic-justice issue. The concept also has the support of Gov. Phil Murphy, a first-term Democrat who has emphasized economic fairness since taking office in January. But it remains uncertain when the broader effort to increase wages will move forward in the State House as ongoing discussions over technical issues like carveouts for specific industries have halted most of the progress this year.

Rate hasn’t changed since 1991

New Jersey’s current hourly minimum wage is set to go up to $8.85 on January 1, thanks to an inflationary adjustment that’s required under language that was written into the state constitution in 2013 following the adoption of a statewide referendum.

The state’s minimum wage has increased by 20 percent since the referendum was approved by voters, but many advocates say the pace of growth has been far too slow. They ultimately want to see minimum-wage workers within a few years earning at least $15, a figure that’s been championed by former presidential candidate, U.S. Sen. Bernie Sanders (I-VT) and others.

But there’s an altogether different set of rules in place for tipped workers. They generally make a baseline of as little as $2.13 per hour — a rate established under federal law that hasn’t changed since 1991. Tips are used by those workers to make up the gap to bring their pay on par with minimum-wage workers in New Jersey who don’t receive tips. Employers have to pay more when tips don’t bring a tipped worker up to the general minimum wage, a point that’s often emphasized by the New Jersey Restaurant and Hospitality Association, a group that opposes making changes to the current tipped-wage rate.

But the measure now being reworked in the Assembly, first introduced earlier this year, would ensure that tips collected by workers would be paid on top of the state’s minimum wage, by eliminating the special rate that exists right now for tipped workers.

Sumter called the effort announced during a news conference on Monday an “equality issue,” saying high percentages of tipped workers in New Jersey are women and minorities. Many also fall under the poverty line and rely on food stamps, she said.

“We believe that through this bill we can actually work to make sure that they earn a fair wage,” Sumter said.

Waiting for Murphy, Sweeney, Coughlin

And just as lawmakers have discussed phasing in the proposal to increase the minimum wage to $15 to ease the burden on businesses, the sponsors of the tipped-wage legislation also favor a gradual approach to getting rid of the separate minimum wage. That has support from some of the state’s leading advocates of higher pay for low-wage workers.

“Phasing out the tipped wage is sound public policy that will boost the take home pay of nearly 200,000 New Jersey workers,” said Brandon McKoy, director of government and public affairs for New Jersey Policy Perspective, a progressive think tank based in Trenton.

In all, more than 1 million New Jersey residents would benefit from a $15 minimum wage, and nearly $4 billion would be pumped into the state economy by the workers whose hourly pay would be increased, according to NJPP.

Murphy has also weighed in on the tipped-wage issue, saying he supports the effort to “ensure a fair and livable wage for all working New Jerseyans.”

“Ensuring a fair wage is about restoring basic fairness to our economy, and about ensuring that every working family can be part of growing our economy,” he said.

It remains unclear when lawmakers will begin to advance any of the minimum-wage legislation that has been up for discussion in the State House in recent months. Around this time last year, after Murphy prevailed in the 2017 gubernatorial election, it seemed the wage legislation would be at the top of the agenda for the new governor and legislative leaders as Senate President Steve Sweeney (D-Gloucester) and Assembly Speaker Craig Coughlin (D-Middlesex) have also voiced their support for the adoption of a phased-in $15 minimum wage.

However, the three leaders have yet to get behind a bill they can all agree to support as issues like exceptions for employees of small businesses or certain industries like agriculture apparently remain a key sticking point. McKoy and other advocates have been pressing hard for a breakthrough before the end of the year, and Murphy discussed the outlook for action at a different news conference held in Trenton on Monday.

“Minimum wage should get to $15 in a responsible timeframe, and I don’t think it’s that hard, frankly,” Murphy said. “I’m looking forward to working with the legislative leaders to get that done.”