Tipped Workers Need a Fair Wage, Not Tweaks to OT Rules

New Jersey should eliminate the tipped minimum wage.

Published on Jan 25, 2017 in Economic Justice

As the fight for a livable wage in New Jersey continues, workers who rely on tips have largely been left out of the debate by legislators in Trenton. While New Jersey’s minimum wage rose to $8.44 per hour in 2017, tipped workers are only guaranteed a cash wage of $2.13 per hour. In fact, the tipped minimum wage hasn’t gone up since 1989 – over 27 years. Officially, if these workers don’t make enough in tips to bring them to the  minimum wage, their employers are supposed to make up the difference. Unfortunately, this doesn’t always happen for a variety of reasons, and as a result, tipped workers are some of the most vulnerable and lowest-earning employees in New Jersey.

In December, the New Jersey Department of Labor and Workforce Development announced proposed amendments to the way overtime pay is calculated for tipped workers. In short, instead of calculating an overtime rate based on actual pay for an actual worker, the new rule would calculate an overtime rate based on the state’s current minimum wage. While this could in theory lead to a boost in overtime wages for tipped workers who are having their wages stolen by their employers, the chances of low-road employers complying with overtime regulations is pretty slim. What the new rule will do, though, is lead to decreased overtime wages for tipped workers who currently earn more than the state minimum wage.

The stated rationale behind this decision is that the current method is unnecessarily complicated, creating confusion for employers, employees, and government compliance officers. In the announcement, the Department acknowledges that the likely impact for tipped workers will be to reduce their already-low earnings and limit their income potential, but it argues that simplifying the rules is more important than improving their wages. It’s a particularly tone-deaf and unacceptable action to take for a class of workers who have not seen a raise in 27 years.

This rule change is wrongheaded, not simply because it will negatively affect thousands of hard working New Jerseyans, but because it presents a false choice. While it may be true that the current rule for determining overtime pay is difficult and confusing, the proper way to deal with that problem without hurting the economic fortunes of tipped workers isn’t to suggest an amendment that creates more income inequality. It makes far more sense to do away with the tipped minimum wage altogether.

Even the President of the New Jersey Chamber of Commerce recognizes that the current minimum wage is inadequate in providing New Jerseyans with the means to afford their basic daily needs. For the Department of Labor and Workforce Development to propose a change that would further reduce the ability for tipped workers — who are already among the most economically insecure workers in the state — to earn a livable wage is unconscionable and irresponsible; particularly when there is a simple and sensible  alternative.

For those who decry the amount of unnecessary government regulation, getting rid of the tipped minimum wage should be a easy policy to support. Doing away with it will simplify labor regulations, help reduce income inequality, and bolster New Jersey’s economy as more workers are able to inch closer to a livable wage. Alaska, California, Minnesota, Montana, Oregon, and Washington have all eliminated the tipped minimum wage without a significant negative impact to their economies or business communities. It’s time for New Jersey to catch up with reality and apply a single minimum wage across all sectors; there’s simply no reason for one class of workers to have a lower minimum wage than others. Doing so will benefit employers, employees, families, and the state as a whole.