It’s no secret that states like California and Washington–which have a flat minimum wage with no tip credit–have had some of the lowest average tipping percentages in the nation.
Seven states (California, Washington, Oregon, Nevada, Montana, Minnesota, and Alaska) prohibit tip credits, which allow restaurant workers to earn a base wage plus tips, as long as tips put workers at or above the regular minimum wage hourly rate. Federal data and reports from actual employees shows they often earn way more than the regular minimum wage because of those tips.
Now new data provides more insight on how eliminating tip credits negatively affects the tips restaurant employees earn.
The latest data published by point-of-sale platform Toast shows non-tip credit states such as California, Washington, Nevada, and Alaska are the lowest tipping states in the nation – based on average tip percentages left on customer checks in full-service restaurants. On the other hand, states that maintain a robust tip credit, such as Ohio, New Hampshire, West Virginia, and Indiana, have some of the highest tipping percentages in the country.
These tipping percentages have declined since the same time last year, according to the Toast report.
Even as the worst states in the nation for tipping, these rates are steadily declining compared to roughly the same time last year, according to Toast.
In fact, all seven no tip credit states rank in the bottom half of the nation for having the largest drops in average tipping percentage.
As tip percentages decline, that means employees subject to flat wage, no-tip credit systems in these take home less tip income. Economist analysis of tip credit elimination policies concurs with this finding: University of California-Irvine economists David Neumark and Maysen Yen find raising tipped wages (i.e. slashing tip credits) causes a 5.6% decrease in take home pay.
While Toast data do not include cities that have recently adopted tip credit elimination policies, including the District of Columbia which has been slashing its tip credit for a year already, the negative impacts on tips are evident there too. Servers and bartenders are reporting taking home half of what they were earning before the policy began – because tips are declining.
Lawmakers should beware the false promises of “tips on top” of a flat minimum wage – as one flat wage states are seeing already-low tipping averages getting worse with time.