Via the Economic Policy Intstitute:
The Department of Labor (DOL) released a proposed rule that would allow restaurants to take the tips that servers earn and share them with untipped employees such as cooks and dishwashers.1 But, crucially, the rule doesn’t actually require that employers distribute “pooled” tips to workers. Under the administration’s proposed rule, as long as tipped workers earn minimum wage, employers could legally pocket those tips.
Evidence shows that even now, when employers are prohibited from pocketing tips, many still do. Research on workers in three large U.S. cities (Chicago, Los Angeles, and New York) finds that 12 percent of tipped workers had tips stolen by their employer or supervisor.2 Further, recent research shows that workers in restaurants and bars are much more likely to suffer minimum wage violations—meaning that they receive less than the applicable minimum wage—than workers in other industries. For tipped workers, some of these minimum wage violations occur when an employer confiscates tips.3
“The proposed rule rescinds those portions of the 2011 regulations that restrict employer use of customer tips when the employer pays at least the full Federal minimum wage.”5 It is thus deeply unusual that DOL did not provide a quantitative estimate of the amount of tips that will be transferred from workers to employers under the proposed rule, given that they are required to do so by law.
Both of my daughters work or have worked as tipped servers in the restaurant industry. The tips they receive push their incomes high enough so they can go to college or save money to do all the things 20 somethings want to do before they enter true adulthood. I do both their taxes every year, they usually get all their FICA back but pay a token amount in California income taxes and of course they both pay SS and Medicare taxes. Their W2s show estimated tip earnings using a formula the restaurant adopts for assumed tips.
When I was in their boat in the 70s, I too earned tips and that money got me through college. I made 2.50$ an hour plus I kept all my tips. Back then, the government did not go after us for the tip money. I believe this changed during Reagan’s administration when they decided all those waiters out there were getting away with murder. By targeting these tipped workers, they are making a very difficult job even worse, waiting tables is not an easy job and it gives young people a chance to work part time while trying to improve their own lives. I wish they would feel as compelled to get at tax breaks for the rich but they don’t.
Bush 2 turned the DOL into an agency that worked for the employer and not the employee as it had and is suppose to do. Yet, people still think unions are destroying America.
With respect to FICA and tips of course it does increase the eventual social security benefit if you unless you work more than 35 years when the lowest pay years drop out.
The day that rule goes into effect is the day I stop tipping. If possible, I will slip cash to my server under the table.
Of course if we had normal (as opposed to abnormal), healthy (as opposed to morbid) levels of labor union density in the US we wouldn’t have to waste any of our time talking about this (would be) non-existent problem of tip theft (nor sex harassment of servers — don’t try it in continental Europe).
Got to start looking at the world outside, especially Europe. Neither UBI nor EITC are going to construct a normal, healthy “first world”.
UBI for instance is not going to break up the gangs of Chicago. They still wont scramble at full steam all day working for what Burger King pays — but for $20/hr they will. Okay, $20/hr is a bit heavy for 33% labor cost fast food (fed min was $11.50/hr in 1968) — but most businesses (and their consumers) can pay that much; 7% labor costs Walmart can pay $25/hr. In any case unions is the only way back that offers realistic, comprehensive hope (in the political forum too as our combined dollars over match the oligarchs — with all the votes too) of creating a normal, healthy (including wage theft free) labor market.