Tipping the Minimum Wage

Three weeks into working in the food service industry as a part time server, and I have had my eyes opened to the good and bad of tip-based wages. I’ve always hated the concept of tipping; as a customer I often wonder if my tip is appropriate or too small for the service rendered. Why couldn’t products just be priced such that employers could offer a fair wage to their employees so I didn’t have to?

In my time in Europe, I experienced the opposite. Often mocked for tipping too much, Americans aren’t generally used to the standard of European tipping: just round up the nearest dollar or so. Of course, the minimum wage for servers in European countries is enough to mitigate this tipping culture. But it wasn’t until I became a server myself that I realized one major implication of American tipping culture:

While minimum wage has not increased proportionally to inflation over the past 50 years, tips allow for the population to subsidize problematic minimum wage standards.

A short digression on minimum wage:

While the federal minimum wage was only $3.35 per hour in 1981 and is currently $7.25 per hour in real dollars, when adjusted for inflation, the current federal minimum wage would need to be more than $8 per hour to equal its buying power of the early 1980s and more nearly $11 per hour to equal its buying power of the late 1960s.

From the US Department of Labor’s “Minimum Wage Mythbuster”

Changing minimum wage policy is as tedious a process as passing any bill in the current political climate, made more tedious by the fact that most of the power (money) holders vehemently oppose an increase to a livable minimum wage.

A Server’s Experiences

Even in just three weeks of working as a waitress, I’ve noticed an interesting phenomenon. With very few exceptions, young people tip much better than adults. On average, adults tip between 12–15% unless there is a reason for a bonus — if they had small kids, there was a dietary need that took extra attention, etc.

However, college students and people under 30 almost always tip between 18–22%. After observing this difference in habits, I talked to many of my friends about their own tipping style. Generally my peers said that they know how low minimum wage for tipped workers is (slightly more than $2 after taxes), and they think that increasing the tip percentage really only costs them a dollar or two on average.

Millennials have a more realistic understanding of the actual purchasing power of modern dollars — we came into our own minimum wage salaries when a Chipotle burrito was the equivalent to one hour’s work. Minimum wage in 1968 could buy about 1.5 burritos. (1968 minimum wage was $1.60; which is equivalent to the purchasing power of $10.34 in modern dollars).

By increasing the standard tip, our generation is subsidizing what we see as an unfair minimum wage, even if this action is unintentional. Maybe it’s time for our politicians to join us in raising the minimum wage back to a 1.5 burrito kind of purchasing power.