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How the Tipped Minimum Wage Furthers the Wealth Gap Against Black Americans

Image depicts a restaurant kitchen, via Creative Commons CC0

As restaurants reopen across the nation, “we’re hiring” signs can be found in nearly every storefront, revealing the food service industry’s newest plight in the context of the Covid-19 pandemic. The national shutdowns that began in March 2020 and continued with cyclical openings and closings throughout the past year have left many service workers without jobs, disproportionately affecting women and people of color and pushing many people into other industries. Closer to home, Brown University’s Brown Dining Services (BDS) has struggled to find enough staff to operate the dining halls safely and effectively, reinforcing the need for higher wages across the industry, regardless of whether or not the workers are tipped. BDS also employs many workers of color to serve a plurality-white community of students, reinforcing the disparities that plague the food service industry.

The need for a livable tipped wage has never been greater, especially as increased unemployment benefits draw to a close and many service workers will be forced to work multiple jobs, risking their health and safety to make ends meet. Although most people believe that the federal minimum wage is $7.25 an hour, under federal law businesses only have to pay their workers $2.13 an hour if they are designated as tipped workers. The tipped minimum wage has not increased since 1991. The Biden administration needs to use this moment of need during a pandemic to ensure that food service employees are paid a livable wage. 

Nationwide, the food service industry has been ravaged by Covid-19, which caused over 100,000 restaurants to shut their doors permanently or for a period of time during the first six months of the pandemic. However, even existing restaurants are struggling to attract and retain employees amid issues of reduced capacity seating, takeout orders, lack of tips, safety concerns, and more. According to the National Restaurant Association, more than eight million restaurant employees were laid off or furloughed, and the industry lost $280 billion in sales during the first 13 months of the pandemic. 

Now that many of those workers can return to work, many don’t want to, choosing more fruitful careers in retail or tech instead. A survey by One Fair Wage found that 53 percent of all restaurant workers are considering leaving their job, with 76 percent of those workers citing low wages and tips as the reason. The added dangers of unvaccinated customers and minimal social distancing in kitchens are just some of the safety concerns that 55 percent of restaurant employees cite as reasons they may leave the industry. 39 percent say they’re considering leaving due to customer hostility.

Businesses such as Chipotle and McDonald’s have resorted to offering referral bonuses and raising wages for current employees. Chipotle increased average hourly pay to $15 an hour, and added new referral bonuses of $200 for crew members, while McDonald’s raised its wages by 10 percent for company-owned restaurants, and is collaborating with franchises to include paid time off and childcare. 

Risks in the food service industry are particularly prevalent for workers of color. Historically, federal minimum wage laws have been passed with the intention of excluding Black Americans by exempting predominantly Black occupations such as domestic and agricultural workers from receiving an equal wage. The passage of the Fair Labor Standards Act (FLSA) in 1938 granted protections against child labor and essentially established a minimum wage for white Americans bydeliberately excluding farmwork and domestic work from the act in order to maintain systemic economic barriers for Black Americans. 

Amendments to the FLSA in 1966 and 1974 included some agricultural and domestic workers, but perpetuated the wage and wealth gaps by failing to adequately protect or compensate tipped workers who could only expect to be paid 50 percent of the federal minimum wage. According to the US Census Bureau, 47 percent of restaurant employees are members of racial minorities. Therefore, these acts disproportionately impact people of color. Research by the Kaiser Family Foundation found that food service workers are more likely to be immigrants and workers of color compared to workers across all industries. The pandemic disproportionately impacted communities of color, with higher mortality rates across industries.

In North Carolina for example, Black people represent 22 percent of the working-age population but accounted for 36 percent of Covid-19 related deaths in that cohort in the past year. Similarly, Hispanic people comprise 9.5 percent of that population yet accounted for 17 percent of those deaths. McClatchy North Carolina’s data analysis found that 87 percent of food production workers that died from Covid-19 in North Carolina were Black or Hispanic. Minorities are overrepresented in the food service industry and Covid-19 related deaths; people of color in this industry are significantly more at risk upon returning to work than their white counterparts. With workplace hazards including hospitalization or death from Covid-19, the $2.13 tipped minimum wage compounds the burden on workers of color.  

Considering these risks, and the fact that the tipped minimum wage has been frozen at $2.13 an hour since 1991, it is important to note that tipped wage itself is a relic of chattel slavery and the Jim Crow era. Businesses such as the The Pullman Company used tipping as a way to avoid compensating newly freed Black slaves for their work. It is not a coincidence that Black workers deal with an extremely low tipped minimum wage in the present. 

In the context of the pandemic, insecurity over tips is just one factor in the employment crisis. The incentive to return to work has also been partially mitigated by the government funded unemployment programs, which gave those who qualified an extra $300 a week through September 6, 2021. 

This unemployment bonus often pays more than what a tipped worker would make in the same amount of time, especially in the context of Covid-19, when 19 percent of Americans say that they tip less than they did before the pandemic. Critics argue that the relief is hindering people from returning to work, but the reality that people are making more from unemployment than from working should be a wakeup call. Both the tipped minimum wage and the wages of non-tipped food service workers should be raised nationwide. 

Raising the tipped minimum wage is crucial, because even in places where food service workers are making minimum wage (which is what the tips plus tipped minimum wage is supposed to be equal or greater to) people still aren’t returning to work since they aren’t making enough money to support themselves or their families. The issue of tipped minimum wage is deeply entrenched in systemic racism. This national issue hits closer to home on Brown University’s campus, where recent reports of an understaffed, overworked, and unsanitary environment have plagued BDS. These serious concerns bring to light fundamental problems within BDS’s system that were only exacerbated by the Covid-19 pandemic. BDS’s current plight serves as a microcosm for the food service industry across the country, as restaurants and fast food chains are struggling to attract and retain employees. 

BDS started a partnership with Bon Appétit Management Company in 2016, an on-site restaurant company. An announcement on the Brown Dining website attributes difficulties to the Covid-19 pandemic, asserting that “nationwide, the Covid-19 pandemic has impacted the food industry in many ways, such as increased labor shortages arising from new demands and restrictions on workers; changes in consumer expectations; closures of food-production facilities, and restricted food trade policies.” 

Due to the understaffing issues within BDS, prep workers who make Brown’s food in “prep rooms” are dependent on one-half to two-thirds the number of staff that they would normally have. The individual responsibilities have therefore increased for each employee and many people are encouraged to put in overtime. 

BDS came under serious scrutiny in the past for mistreatment of workers; a lawsuit filed in 2019 by two students, Maxwell D. Kozlov and Benjamin D. Bosis, accused Brown University of violating Fair Labor Standards and state employment laws by not paying them for excessive overtime and “on-call” hours. 

Brown University settled this lawsuit for a total of $620,000 and implemented a 20-hour work week maximum for students. According to spokesman Brian Clark, Brown “shifted the structure of the student management team” so that there would be less pressure on students. This alteration to BDS’s operating structure meant that there are now fewer students working fewer hours. Further reducing available labor is the fact that BDS laid off many subcontracted employees at the beginning of the pandemic and has not rehired them in adequate numbers. 

On November 1, BDS’s union contract, which was created in 2014 to protect the safety and rights of the workers, will expire. As a new contract is negotiated, issues of labor, equipment, raises, and health insurance premiums are at the top of the negotiating list. The existing union contract was not created for issues presented by Covid-19, and like many restaurants and businesses within the nationwide food service industry, the demand for workers rights is reaching a tipping point. 

The issues that BDS is experiencing show that raising the tipped minimum wage is a start, but not the end of the industry’s labor problem.