It's Time to Change the Law on Minimum Wage and Tips for Service Workers
/by Nick Teeling
Connecticut Voices for Children supports S.B. 221: An Act Concerning Gratuities As Part of the Minimum Fair Wage because keeping the subminimum wage in place restricts service workers from experiencing the real wage growth many Connecticut workers are seeing, and continues to perpetuate wage inequities across gender, race and ethnicity.
S.B. 221 will gradually phase out gratuities, otherwise known as tips, from being calculated as part of an employees minimum fair wage starting July 1, 2024 and completing the phase out on July 1, 2027. Upon the completion of the phase out, the minimum fair wage for these workers will be adjusted by the percentage change to the employment cost index as calculated by the United States Department of Labor.
The increase in Connecticut’s minimum fair wage has resulted in the real hourly wage growing more for low- and middle-wage workers than higher wage workers for the first time in nearly four decades.1 From 2019 to 2022 wage growth in Connecticut for low- wage workers exceeded wage growth for middle- wage workers, and wage growth for both low- and middle-wage workers was greater on average in Connecticut than in the U.S. as a whole. Low- and middle wage workers in Connecticut saw their wage growth generally exceed inflation, resulting in an increased standard of living, especially for low-wage workers.
Service workers previously saw their minimum fair wage calculated to include gratuities. Gratuities, as of 2017, could make up at least 36.8 percent of server wages and gratuities could make up bartender wages of at least 18.1 percent. The recent increase in the minimum wage to $15.69 per hour saw service worker wages frozen at $6.38 per hour for servers and $8.23 for bartenders resulting in workers becoming increasingly reliant on tips. The change in the law means that gratuities can now make up at least 59.3 percent of server wages and 47.5 percent of bartender wages.
That represents a 61.1 percent increase in the amount servers must rely on gratuities to make up their minimum fair wage, from 2017 to today, and a 162.4 percent increase in the amount bartenders must rely on gratuities to make up their minimum fair wage.
This heavy reliance on gratuities can be especially challenging for women and people of color, who continue to experience disproportionate wage gaps. Connecticut’s service industry is currently made up of 70 percent women and 36 percent people of color.
“Connecticut’s service industry is currently made up of 70 percent women and 36 percent people of color.”
Connecticut Voices for Children’s 2023 State of Working Connecticut report showed that the unadjusted average gender wage gap ranged from $0.93 at the 10th percentile to $0.78 at the 80th percentile, the unadjusted average Hispanic or Latiné-white wage gap ranged from $0.87 at the 10th percentile to $0.70 at the 80th percentile and the unadjusted average Black-white wage gap ranged from $0.80 at the 10th percentile to $0.65 at the 80th percentile.7 The smaller gap for low-wage workers is due in part to the minimum wage, which sets a floor for all workers, except for service workers continuing to make a subminimum wage.
By keeping the subminimum wage in place, women and people of color, especially, will continue to experience inequitable tipping practices. One Fair Wage conducted a study in 2021 that showed nearly 90 percent of Black service workers surveyed reported their tips have fallen during the pandemic by 50 percent or more. In another study conducted by One Fair Wage in 2022, 50 percent of all women and 58 percent of women of color surveyed said they are not making the full minimum wage after tips. These two glaring examples show how despite the real hourly wage growing for low- and middle-income workers, reliance on tips perpetuates wage inequities, and will only be exacerbated as the minimum wage increases and the subminimum wage remains stagnant.
Lastly, a full minimum wage with tips on top has been established in seven states: California, Oregon, Washington, Nevada, Montana, Arkansas, and Minnesota. According to the One Fair Wage Campaign, these states have “higher restaurant job growth rates, small business growth rates, and tipping averages than states that offer a subminimum wage.” For these reasons and more, Connecticut Voices for Children urges the committee to pass S.B. 221: An Act Concerning Gratuities As Part of the Minimum Fair Wage.
Nick Teeling is Advocacy Deputy Director at Connecticut Voices for Children. Connecticut Voices for Children (CT Voices), a research-based advocacy organization working to ensure that Connecticut is a thriving and equitable state where all children achieve their full potential.
