Economists Warn Congress About Changing the Tipped Wage

Today, the Employment Policies Institute (EPI) took out a full-page ad in Roll Call warning lawmakers on the consequences of eliminating the tip credit, as Sen. Bernie Sanders’ Raise the Wage Act would do. Tipped workers nationwide have actively opposed legislation to change the tipped minimum wage. But economists are skeptical, too. As the ad explains, the best research shows that a higher tipped wage leads to fewer tips, an increase in restaurant closures, and fewer job opportunities for tipped workers.

The ad highlights the following findings from economists across the country:

  • “…higher mandatory tipped minimum wages…decrease tip income”: A U.S. Census Bureau study finds that as cash wages paid to tip-eligible employees are raised, tip income decreases by the same proportion.
  • “Restaurants…driven out of business”: A Harvard Business School study found that a $1 minimum wage increase in San Francisco (which does not allow any tip credit) led to 14 percent higher likelihood of median-rated restaurant closure.
  • “…full service restaurants…hire fewer tipped workers…”, Economists from Miami and Trinity Universities find that eliminating tip credits costs tipped jobs. States with no tip credits find restaurants employ a significantly smaller share of tipped employees.

EPI has launched to refute common myths on the tipped wage. Earlier this year, EPI released a detailed policy brief in support of the tipped wage, which also includes a history of tipping, failed experiments to end tipping, and employees’ advocacy to save their tips. Another project,, features servers and bartenders from around the country who support the tipping system.