Tipping and creates higher earning potential for tipped employees. Tipping also helps restaurants with slim profit margins recruit and retain top talent. No state has eliminated the tip credit in more than two decades, and the tip credit has bipartisan support at the local, state and federal levels.
Tip Credit: Overview
Federal law requires that every employee earn at least the federal minimum wage, or the higher state or local minimum wage in 29 states and 55 municipalities. If the combination of the base wage and earned tips does not total the required minimum wage, the employer must pay the tipped employee more to make up the difference.
If the tip credit is eliminated, many restaurants would terminate tipping, raise prices to cover higher wages, and move to an hourly wage-only system. Tipped employees would likely earn less than they currently do.
Hospitality and flexibility are hallmarks of the restaurant industry and why nearly 90% of consumers enjoy going to restaurants. Tipping is why so many people choose restaurants as a first job, a side job for extra income, a job while in school, a second chance, or a career.
Employees and voters oppose ending the tip credit. Recent attempts to eliminate the tip credit in Chicago, Maryland, D.C., Michigan, Virginia, New Mexico and Maine were soundly defeated after tipped workers spoke out about why they prefer the tip credit.