Understanding the ‘Tipped Minimum Wage’ in the US Restaurant Sector

This blog is based on an artcile in Social Policy and Society. Click here to access the article.

Understanding the practice of ‘tipping’ is absolutely essential for understanding service labour in the United States today. The issue of the ‘tipped minimum wage’ lies at the heart of a policy battle raging right now in the US. However, the practice is likely not too far from your own front door either, for its form is expanding across the world economy. Our article is primarily about the practice of tipping in the US restaurant industry, both in the more specific terms of the US social policy landscape and in its broader societal role. But beyond the hot debate currently unfolding in the US over the social policy of tipped income, there is also a great deal to be said about the importance of the practice for capital-labour struggles more generally. It is something of immediate significance for many workers, but it is also indicative of specific long-term trends in the political economy of the capitalist world-system. What could this mean and how can we connect the two? Before getting to the specific social policy problem, let us start from the outside in.

The neoliberal paradigm of political economy has repeatedly proven itself ineffective, across the core states of the world-system, at securing sustained and crisis-free accumulation of surpluses for the reproduction and survival of capitalism. In the characteristic rent-offensives and accumulations-by-dispossession that have emerged to bolster up this model of accumulation, capital needs to access more surplus from labour through the innovation of new and more effective post-disciplinary labour control techniques.

This is what is known as the real subsumption of labour, and it is in order to achieve this real subsumption that we should approach the growth in personal service work, uberisation, and the gig economy that we have seen explode in the neoliberal period. As we observe the spread of ever more informal work forms that internalize worker control more effectively, and which incentivize more willing labour than was forthcoming in Fordist production regimes, the need arises to discover the techniques that drive the informalization, internalization and incentivisation characteristic of post-disciplinary service work. In short, we must identify techniques of labour control that more effectively transform worker subjectivities for capital. This is where the practice of tipping enters the picture.

Tipping is more than a paid supplement for service labour performed. It is the primary form of income received by millions of service workers across the US. Briefly, a ‘tip’ is the price, determined unilaterally by the customer, for a service received. It is not obligatory, and its amount is not fixed in advance, except by a variable social code. Whereas wages are fixed and allow a worker to depend on income, tips are something unfixed, flexible and subject to arbitrary determination.

Tips are then clearly a more precarious source of income than wages, and the practice’s comparatively informal and arbitrary structure is of great importance for its superior utility over and above wages in achieving real subsumptions of labour. Far from an accidental side-effect, the precarity of tipping makes for a more effective technique in both the personal internalization of control on the part of the worker and the affective incentivisation to labour outside the mould of disciplinary power. This is because the subjectivity produced by tipping is one defined by a fundamental dependence on the arbitrary will of others.

However, though it is vital to grasp this character to the tipping technique at a strategic level, these are fairly broad brush strokes for a social policy analysis. What is specifically at issue here is the formal policy terms in which tipping exists at present in the US. What kind of social policy has emplaced this practice and how is this informal practice sustained in a formal policy framework? Why is it particularly problematic as it stands? What exactly needs to be reformed, and how can it be reformed?

The explicit justification given for a tipping system is that it is supposed to incentivize workers to improve the quality of service provided and to increase the economic efficiency of work performed. However, leaving the veracity of this claim aside, there is another reason to retain the tipping system: it allows restaurant owners to pay their workers a lower wage. It does this through something called the ‘tip credit’ system, which quite simply works on a systematic differential existing between a ‘tipped minimum wage’ and the regular minimum wage.

Usually much lower than the regular minimum wage, the ‘tipped minimum wage’ is a sub-minimum wage paid by employers to tipped workers that is ostensibly designed to compensate tipped workers up to the regular minimum-wage in the event of a shortfall in their tipped income below that level, but which does not otherwise oblige employers to pay above the compulsory base of the ‘tipped minimum wage’. The difference between the two is referred to as the ‘tip credit’, and the effect is to create a two-tier minimum wage system.

The relative size of the tip credit differential varies from state to state, but there is a growing movement across the country to harmonize tipped and regular minimum wages and thus to eliminate the tip credit system. Worker organisations such as ROC United (Restaurant Opportunities Centers) are resisted by employer lobbies like the NRA (National Restaurant Association), along with numerous neoliberal think tanks (ie. Employment Policies Institute), and the policy battle is well underway.

In our article, we argue in greater detail how the ‘tip credit’ system needs to be reformed. However, we also explain how this particular social policy problem must be approached within a more broadly societal understanding of tipping as an increasingly prevalent and utilized practice of labour control in neoliberal capitalism. Tipping is not an obscure niche issue couched away in social policy research. In its basic structure and dynamic, it is a strategic technique that might well come knocking on your door in the near future.

About the authors

Jacqueline Ross is a doctoral researcher at the University of Bristol.

John Welsh is a researcher at the University of Helsinki.

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