The Fight Against Tip Credit Elimination Across the Country

As state legislatures spring into action, several bills across the country are targeting tip credits that allow restaurant employers to count tips toward the regular minimum wage requirement. This is part of a larger campaign by union activists at Restaurant Opportunities Center-affiliated One Fair Wage – pledging a $25 million campaign to eliminate tip credits in 25 states.

But tipped restaurant employees are also mobilizing to save the tip credit and their tips. For example, dozens of employees turned out in Maryland earlier this month to testify before the state Senate Finance Committee how tip credit elimination would affect their jobs and earnings.

Seven states have already eliminated their tip credits, most recently joined by Washington, D.C. In November 2022, voters again passed a measure to end the District tip credit and raise the tipped minimum wage by more than 200 percent, despite tipped employees’ objections. Tipped restaurant employees had previously fought against and overturned a similar measure back in 2018.

As such, restaurants have already begun bracing for the effects of the new law with nearly 150 implementing service charges, prompting locals to express confusion and concerns about the impacts on tipping.

But D.C. could be joined by several more states who are considering tip credit elimination laws if they don’t heed lessons from past economic research. A recent study by economists at the University of California-Irvine analyzing state wage hikes finds that each $1 increase in the required wage for tipped restaurant employees can cause a 6.1% decrease in employment and a 5.6% decrease in employees’ earnings.

Based on these findings, economists at Miami and Trinity Universities have estimated the potential consequences for states considering bills to eliminate the tip credit this year.

States with active tip credit elimination bills include:

—–  MARYLAND  —–

S.B. 803 would eliminate Maryland’s tip credit and raise the current tipped minimum wage of $3.63 per hour up to the regular rate, which is slated to hit $15 in 2025. Economists estimate this would:

  • Cost Maryland 7,719 tipped jobs, representing roughly 6% of the state’s workforce
  • Cost tipped workers up to $44 million in earnings across the state, as much as $8,093 annually for tipped workers’ families

—–  NEW YORK  —–

S. 808A would eliminate New York’s tip credit and raise the current statewide tipped wage of $8.80 per hour up to the regular rate, currently scheduled to reach $15 per hour next year. There is another movement to raise this regular minimum wage as high as $20 per hour statewide and $21.25 in New York City, which if enacted would also apply to tipped restaurant workers. Economists estimate this would:

  • Cost New York 7,129 tipped jobs, representing roughly 2% of the state’s workforce.
  • Cost tipped workers up to $44.9 million in earnings across the state, as much as $2,198 annually for tipped workers’ families.

—–  CONNECTICUT  —–

S.B. 1177 would eliminate Connecticut’s tip credit and raise the current statewide tipped wage of $6.38 per hour up to the regular rate, currently scheduled to reach $15 per hour on June 1. Economists estimate this would:

  • Cost Connecticut 2,198 tipped jobs, representing roughly 3% of the state’s workforce.
  • Cost tipped workers nearly $8 million in earnings across the state, as much as $241 annually for tipped workers’ families.

—–  ILLINOIS  —–

S.B. 293 would eliminate Illinois tip credit and raise the current statewide tipped wage of $7.80 per hour up to the regular rate, scheduled to reach $15 per hour by 2025. Economists estimate this would:

  • Cost Illinois 7,730 tipped jobs, representing roughly 2.5% of the state’s workforce.
  • Cost tipped workers up to $20.7 million in earnings across the state, as much as $1,815 annually for tipped families.