Evan Soltas
Sep 1, 2014

Tipped Workers and Hours

A couple summers ago, I worked as a busboy at a seafood restaurant on the Jersey Shore. The restaurant no longer exists. Hurricane Sandy wiped it off the map. But I was reminded of that summer on Labor Day.

Raising the federal minimum wage, now $7.25, has become a greater priority for public policy over the last couple years. My home state of New Jersey raised it by referendum to $8.25 for 2014 onwards, and we're hardly alone.

Here's an important reminder: More Americans (1.98 million) earn less than the minimum wage than earn the minimum wage (1.56 million), according to the Bureau of Labor Statistics. Tipped workers, like I was, earn a base pay of $2.13 an hour. They are expected to receive $5.12 an hour in tips to bring them up to $7.25.

Why I'm writing this post is to connect that importance of sub-minimum-wage workers to something else. Jodi Kantor had an excellent report last month on the role of erratic schedules for part-time workers who are also trying to care for a family. Kantor details the particularly painful experience of "clopening," that is, working until the close of a restaurant late into the night and then waking up early to reopen it the next morning, an experience I enjoyed a couple times.

Claudia Goldin's work has emphasized the role of hours -- in fact, she established a clear the flexibility of hours in an industry to the magnitude of the gender pay gap in that industry. It's likely that the tipped minimum wage is linked to these crazy hours. Let me explain why.

Let's imagine that I worked Saturday night, which is particularly busy on the Shore. Counting tips plus $2.13-an-hour base pay, I usually made well over the $7.25 minimum wage. But I'd often get assigned to work Monday mornings as well. Not many people like to eat seafood at 9 a.m. The consequence of this is that tips ran well below the $5.12-an-hour they'd need to be to keep me at a wage of $7.25 for every marginal hour. Instead, what was happening was that my tips from the Saturday night were being pulled forward in time, so that all I was really earning, on the margin, was the $2.13 an hour.

Some labor economists think that fraud and underpayment is one reason why the restaurant industry defends the tipped minimum wage so dearly. That's possible, but the story I just gave you provides the intuition for another reason why the tipped minimum gets defended: It gives the restaurant industry another pool of workers whose marginal wage is $2.13, because they've happened to pick up a shift that was more lucrative.

The key point is that this allows restaurants to stay open during hours when, at $7.25 an hour, it would not be otherwise profitable to be open. On the margin, those hours don't make sense -- they only make sense because the tipped minimum wage framework allows employers to average the cost of labor over a pay period. Blame the crazy hours, and perhaps the "clopener," on the tipped minimum wage.