Tipped wage hikes have no impact on reducing earnings gaps: Study

(The Center Square) – With a move to expand the elimination of a tipped wage throughout Illinois, a new study refutes anti-tip credit activists' claims that eliminating the current tip credit system would reduce inequities faced by women and minority workers.

The Employment Policies Institute (EPI) released a new study conducted by University of California-Irvine economists, which examines how increasing the tipped minimum wage affects earnings gaps for restaurant workers. The study finds tipped wage hikes have no impact on reducing earnings gaps between white male workers and their female and minority counterparts.

The study analyzes U.S. Census Bureau data and found tipped wage hikes are shown to increase, rather than decrease, the hourly wage gaps between minority tipped employees and white tipped employees.

“The data shows that raising tipped minimum wages does not impact earnings shortfalls of minorities or women relative to white men,” said David Neumark, professor of economics at the University of California-Irvine. “Tip credit elimination is an ineffective solution to solve a very real problem of lower pay for minorities and women.”

State Rep. Lisa Hernandez, D-Cicero, has led an effort to expand Chicago’s wage hikes statewide, but her legislation stalled in Springfield.

“We fully intend to continue working on this bill to ensure our workers in Illinois are taken care of,” said Hernandez.

An EPI report showed that full-service restaurant employment in the Chicago area declined in the months leading up to the July 1 wage increases, a sign that restaurants were bracing for future wage increases.

The Illinois Restaurant Association predicts some diners will now tip less and lower take-home pay for restaurant employees.

The latest study comes as the Harris campaign changed its policy platform to include ending the tip credit after lobbying from the group One Fair Wage, and just a few months after the tip credit elimination began to roll out in Chicago.

“Anti-tip credit organizations like One Fair Wage have crusaded against tipping in America for years, claiming that eliminating the tip credit will reduce discrimination and inequality in the industry,” said EPI research director Rebekah Paxton. “The data shows that’s simply not true.”