Mel Nichols, a 37-year-old bartender residing in Phoenix, Arizona, enjoys an hourly income that fluctuates between $30 and $50, including tips. However, the variability in her earnings is a persistent cause of anxiety.
“Every good day is followed by at least three bad ones,” Nichols remarked, having worked in the service industry since her teenage years. “There’s no security in knowing how much you will earn.”
This lack of certainty is primarily due to federal labor regulations that permit businesses to pay workers receiving tips—such as bartenders, servers, and bellhops—less than the standard minimum wage, as long as tips compensate for the difference. In November, voters in Arizona and Massachusetts will weigh in on whether it remains prudent to permit employers to offload some of their labor expenses onto consumers.
The proposed ballot measures highlight an increasingly heated discussion regarding the so-called subminimum wage. Proponents argue that this wage structure is vital for the survival of the service industry, while opponents claim it transfers employer costs to workers, leaving them vulnerable to exploitation.
The income of tipped workers varies notably across different states. Currently, 14 states adhere to the federal minimum wage for tipped workers, offering just above $2 per hour, while non-tipped workers receive $7 per hour.
In Arizona, employers have the latitude to pay tipped employees $3 less per hour than their non-tipped counterparts. As it stands, that sets tipped workers’ base pay at $11.35 an hour.
Voters will soon decide on a measure endorsed by the Arizona Restaurant Association and local Republicans, which aims to adjust the minimum wage for tipped employees to 25% lower than the standard minimum. This proposition stipulates that workers still earn at least $2 above that adjusted minimum through tips. Presently, Arizona’s hourly minimum wage is $14.35 and increases annually based on inflation.
In Massachusetts, voters will face a decision on whether to change the current tiered minimum-wage system. A new measure seeks to gradually raise the tipped worker wage—currently at $6.75—until it aligns with the regular minimum wage by 2029. This initiative stems from One Fair Wage, a nonprofit organization aiming to eliminate the subminimum wage.
Should voters support this measure, Massachusetts would join seven other states that operate under a unified minimum wage, a group that is set to grow as Michigan begins phasing out its subminimum wage following a recent state Supreme Court ruling.
James Ford, a dedicated hospitality employee from Detroit, acknowledged the financial strain of not earning a living wage, expressing optimism regarding the legal changes. “When your earnings don’t let you cover your bills, it takes a toll,” he said.
Several other states have also placed wage-related propositions on their ballots. In California, voters will determine whether to elevate the minimum wage from $16 to $18 by 2026, making it the highest statewide wage in the nation. Similar measures in Alaska and Missouri aim to incrementally increase minimum wages to $15 per hour while mandating paid sick leave.
In recent years, both Washington, D.C., and Chicago have initiated steps toward eliminating the subminimum wage. Employers are required to ensure that their workers receive the full minimum wage should their tips fall short; however, noncompliance with federal labor standards is not uncommon. An investigation by the U.S. Labor Department from 2010 to 2019 revealed that 10% of bars and restaurants nationwide violated provisions of the Fair Labor Standards Act, culminating in nearly $114 million in back wages paid.
This issue notably impacts women, who represent approximately 47% of the U.S. labor force but make up nearly 70% of those employed in tipped occupations, as indicated by analysis of U.S. Census data.
In Arizona, Republican State Senator J.D. Mesnard, who sponsored Proposition 138, believes that the measure benefits both business owners and lower-income workers.
“It protects employers by allowing them to maintain a lower base pay while relying on tips, which ensures that tipped workers earn more than the current minimum,” Mesnard explained.
However, Nichols disagrees with this perspective. “It would lower my hourly wage, and any decrease in wages is unwelcome,” she remarked. “I don’t think it’s necessary for business owners to have further reductions in labor costs.”
Proposition 138 was initially introduced as a counter to a ballot initiative aimed at establishing a single minimum wage of $18, which was abandoned following threats of litigation from restaurant groups over signature collection methods.
Now, One Fair Wage is concentrating its efforts on raising wages through legislative channels. Democratic State Representative Mariana Sandoval expressed hope that her party can gain control of the Legislature in the November elections, where Republicans currently hold a narrow majority.
Lindsay Ruck, a server at a Phoenix restaurant near the airport and a veteran of nearly two decades in the industry, shared her experiences of dealing with difficult patrons. Despite her substantial earnings of about $60 an hour from tips, she feels restrained when it comes to addressing troublesome customers.
For Ruck, the focus should be on increasing base pay, rather than reducing it. “There should be a unified minimum wage, with tips being an additional benefit,” she asserted.
The National Restaurant Association and its affiliates caution that if employers can no longer depend on tips to help cover wages, it may lead to reduced hours, job losses, and increased menu prices. This is the rationale behind Dan Piacquadio, co-owner of Harold’s Cave Creek Corral restaurant in Phoenix, who advocates for the passage of Proposition 138.
“This proposal is intended to safeguard the existing system that has functioned for 20 years, to protect restaurant owners, and to maintain fair pay for tipped workers,” Piacquadio commented.
A study by labor economist Sylvia Allegretto noted that between 2012 and 2019, both the number of restaurants and their employment rates grew more rapidly in states with a single minimum wage than in those utilizing the lower federal tipped wage.
“We find ourselves in a state with a $16 minimum wage,” Allegretto elaborated from California, where she works at the Center for Economic and Policy Research. “There is no subminimum wage, and our restaurant sector is thriving.”