People who work for tips are far more likely to live in poverty, according to a new report from the Economic Policy Institute EPI.
The poverty rate for workers who don’t make tips is 6.5 percent, but the rate for tipped workers is 12.8 percent — meaning that people working for tips are nearly twice as likely to live in poverty. They are also more likely live in low-income households, as 47.2 percent of tipped workers are in families that make less than $40,000 a year, compared to 30.5 percent of the general workforce.
Given all this, it’s not surprising that tipped workers are more likely to rely on public benefits such as food stamps, housing and energy subsidies, the Earned Income Tax Credit, school lunch subsidies, and the Supplemental Nutrition Program for Women, Infants, and Children WIC. About 46 percent of tipped workers and their families use these programs, compared to 35.5 percent of those who don’t work for tips.
One big reason for the high poverty rate among tipped workers is that they have a lower minimum wage than all other workers. Since 1991, employers have been able to pay workers the same base rate of $2.13, although they are supposed to make up the difference if a worker’s tips don’t bring her total haul to $7.25 an hour. Tipped workers still end up making less, though: they have a median wage, including tips, of $10.22, compared to $16.48 for all workers.