Island Voices: Eliminate unfair ‘tip penalty’ for service workers

By Mary Ochs, the Rev. Sam Domingo and John Witeck


What is it about tipped workers that has some legislators worried that these workers may earn too much? The fact is that tips are very unpredictable and not a reliable source of income. Some servers working in fine-dining or large popular chains may have some very good days and busy shifts, but most tipped workers have irregular hours or slow shifts and don’t earn much in tips. Many live in near-poverty, often working several jobs to make ends meet.

Their employers are allowed to pay these workers a wage less than the minimum wage of $12 an hour, and their tips supposedly make up the difference. This “make-up” amount is what is called a “tip penalty,” although to the employers it is a “tip credit” due to the money it saves them in wages. It’s a shame that state Sen. Glenn Wakai has proposed Senate Bill 125, to increase the tip penalty to 20% of the $12 minimum wage, and thus further decrease the actual paid wages of tip-category workers by $2.40. It is less money in people’s wallets and less money for them to take home to their families. This measure benefits only the employers and puts the workers who serve
us at greater risk.

Thirteen states and several localities have eliminated this awful “tip penalty” policy and require tipped workers to be paid the same minimum wage as all workers. Restaurants in these states have not been shut down or harmed by this policy and, in fact, many have flourished. These states and localities have higher restaurant job growth rates, higher
small business growth rates, and higher tipping averages than states that offer a subminimum wage. They also have one-half the rate of sexual harassment in the restaurant industry. These tipped workers and the community have benefited from their better incomes. It helps create a more stable workforce and our economy benefits when
more workers have disposable income.

The minimum wage is not a living wage. It’s the floor of the value that we put on an hour of labor of someone’s life. Tips can help raise a worker’s income to something more livable.

What is the harm if some workers make a decent hourly wage without being penalized if they receive tips? We should remember that tips originated as gifts of appreciation for excellent service, not as a subsidy to their employer. Why should the workers be penalized for their good service, and their employers rewarded by being able to pay a lower hourly wage? This is nonsensical and an injustice. We should be happy that these workers who serve us can better support their families or pay for their higher education in Hawaii and not have to move to states like Washington, Oregon, Nevada or California — all of which long ago eliminated the subminimum wage for tipped workers. There is a better alternative to the poorly conceived and harmful SB 125 against workers. The Hawaii Workers Center is partnering with the One Fair Wage campaign in supporting House Bill 1288 introduced by state Rep. Jeanne Kapela, and SB 270 introduced by state Sen. Kurt Fevella; both bills would completely eliminate the tip penalty. Such a change would also better ensure that employers can find enough workers to provide services at
their establishments. It’s time we stop penalizing workers to subsidize their employers.

Mary Ochs, the Rev. Sam Domingo, center, and John Witeck serve on the board of
directors of the Hawaii Workers Center.

Copyright (c)2023 Honolulu Star-Advertiser, Edition 1/31/2023
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