With Massachusetts voters poised to have their say next month on ballot Question 5, which would eliminate the state’s subminimum wage for tipped workers, a new policy brief from the University of Massachusetts Amherst shows that gradually increasing these employees’ pay to the state’s full minimum wage could have significant benefits for workers and a minimal impact on employers and their customers.

Image

Currently, Massachusetts law allows employers to pay tipped workers a base rate (or “service rate”) of $6.75 per hour, and tips from customers are supposed to cover any gap between $6.75 and the state’s full minimum wage of $15. If tips do not cover the difference, employers are obligated to pay the shortfall, bringing the worker up to $15 for that shift. However, it often falls upon workers to ask their employers to make up the difference.

The ballot proposal would gradually eliminate the subminimum wage so that by 2029, Massachusetts employers would be required to pay tipped workers the full minimum wage.

The research from the Political Economy Research Institute (PERI) and the Labor Center at UMass Amherst finds that phasing in the full minimum wage for waiters, bartenders, hosts and other tipped workers has “meaningful potential upsides,” including the potential to reduce wage theft. The restaurant and hotel industry has disproportionately high rates of wage theft claims, meaning that workers are not paid what they are owed.

In addition, the policy brief concludes that restaurant and hotel workers are likely to earn more in states without a subminimum wage, and that eliminating the subminimum wage in Massachusetts would likely increase costs for the average restaurant by about 2%, without producing significant job losses.

“It’s important to understand that tipped workers are typically from vulnerable social groups — they’re disproportionately women, people of color and earn low wages. These workers are concentrated in the restaurant and hotel industry, which we find to have relatively high levels of worker complaints related to wage theft issues,” says Jasmine Kerrissey, associate professor of sociology and Labor Center director. “Although the restaurant and hotel industry accounts for less than 6% of employment, it accounts for nearly 14% of all worker complaints.”

Proponents of Question 5 argue that eliminating the subminimum wage for tipped workers would improve the job quality of tipped occupations and that requiring employers to pay their tipped workers a full minimum wage would help reduce wage violations and improve workers’ pay.

Opponents of the proposal argue that the stronger labor standard could backfire for tipped workers by customers reducing their tips and by substantially increasing costs for businesses, resulting in higher prices and/or job cuts.

“We find that eliminating the subminimum wage will only modestly raise business costs. This is because Massachusetts tipped workers already typically earn around $12 an hour as their base pay (without tips) and because they won’t get to the full $15 minimum wage for five years (i.e., by 2029),” adds Jeannette Wicks-Lim, research professor at PERI. “The average Massachusetts restaurant should be able to adjust to their increased costs by raising prices about 2%. A $50 meal would go up to $51, for example. Past research has found that minimum wage hikes linked to cost increases of this size do not produce measurable job losses but have raised workers’ earnings.”

Currently, eight other states and two major cities have eliminated or are in the process of eliminating a lower minimum wage for tipped workers.