There is no conflict of interest.
Highlights
- The study's objective was to examine the impact of minimum wage tip credits on earnings and employment outcomes.
- The study used a nonexperimental design to compare the effects of wage tip credits on outcomes for full-service restaurant workers and limited-service restaurant workers. Using the Quarterly Census of Employment and Wages (QCEW) and statistical models, the authors compared differences in outcomes between full-service and limited-service restaurant workers.
- The study found that tipped minimum wages significantly increased weekly earnings but reduced employment for full-service restaurant workers compared to limited-service workers
- This study receives a moderate evidence rating. This means we are somewhat confident that the estimated effects are attributable to minimum wage tip credits, but other factors might also have contributed.
Intervention Examined
Features of the Intervention
Minimum wage tip credits allow employers to pay tipped workers less than the standard minimum wage, provided that tips ensure their total earnings meet or exceed the minimum wage. If tips fall short, employers are required to compensate the difference to ensure compliance with minimum wage laws. State policies on tipped minimum wages differ from federal regulations and can change over time. In some states, the tipped minimum wage matches the regular minimum wage and is higher than the federal rate, while in others, it aligns with the federal rate. Additionally, some states have tipped minimum wages that exceed the federal rate but vary individually. Restaurant workers typically earn both cash wages and tips. Employers in the restaurant industry must ensure that the total compensation, including tips, meets the minimum wage requirement by covering any shortfall with additional wages. These policies target full-service restaurant employees with tipped wages.
Features of the Study
The study used a nonexperimental design to examine the effects of wage tip credits on the outcomes of full-service restaurant workers compared to limited-service restaurant workers. It analyzed differences in wages from 1990 to 2019 in all 50 U.S. states and the District of Columbia, focusing on the period from 2010 to 2019. The sample included various state categories based on minimum wage and tip credit policies. Specifically, 15 states adhered to the federal minimum wage of $7.25 and a tipped minimum wage of $2.13, while 2 states had a higher minimum wage but still followed the federal tipped minimum wage. Additionally, 21 states offered both a higher minimum wage and a higher tipped minimum wage but allowed tip credits, and 7 states had a higher minimum wage without any tip credit.
The primary data source was the Quarterly Census of Employment and Wages (QCEW). The dataset included 6,120 observations from 1990 to 2019 and 2,040 observations from 2010 to 2019. The treatment group consisted of full-service (tipped) restaurant workers, while the comparison group included limited-service (non-tipped) restaurant workers. The authors used wage data from the QCEW and statistical models to compare employment and earnings outcomes between the two groups.
Findings
Earnings and wages
- The study found that, from 1990 to 2019, tipped minimum wages significantly increased weekly earnings for full-service restaurant workers compared to limited-service workers.
- The study also found that, from 2010 to 2019, regular minimum wages significantly reduced average weekly wages for full-service restaurant workers compared to limited-service workers.
Employment
- The study found that, from 1990 to 2019, tipped minimum wages significantly reduced employment for full-service restaurant workers compared to limited-service workers.
- However, the study found that regular minimum wages significantly increased employment for full-service restaurant workers compared to limited-service workers during the same period.
Considerations for Interpreting the Findings
The study authors noted that the primary data source Quarterly Census of Employment and Wages (QCEW) may not have adequately captured tips earned and that these earnings could be understated.
Causal Evidence Rating
Research Guidelines
Review Protocol: Living Systematic Annual Search and Review Protocol
Review Guidelines: Causal Evidence Guidelines