Should the minimum wage be lower for workers who receive tips? The two states are ready to decide

Mel Nichols, a 37-year-old bartender in Phoenix, Arizona, takes home $30 to $50 an hour, including tips. But the uncertainty of how much he is going to do on a daily basis is a constant source of stress.

“For every good day, there are three bad days,” says Nichols, who has been in the service industry since she was a teenager “You have no security when it comes to knowing how much you're going to earn.”

This uncertainty exists largely because federal labor laws allow businesses to pay workers like food servers, bartenders and bellhops less than the minimum wage as long as customer tips make up the difference. Voters in Arizona and Massachusetts will decide in November whether it's good policy to continue letting employers pass some of their labor costs on to consumers.

The ballot measure reflects an accelerating debate over the so-called minimum wage, which advocates say is essential to the sustainability of service industries and opponents say pushes the cost of labor onto the shoulders of employers and leads to the exploitation of workers.

The amount tipped to workers varies by state. Fourteen states pay the federal minimum, or $2 per hour for tipped workers and $7 per hour for non-tipped workers.

Arizona employers can pay their tipped workers $3 less an hour than other workers. Under current rates, that means a base salary of $11.35 an hour for tipped workers.

Voters will decide whether to approve a measure backed by state Republicans and the Arizona Restaurant Association to change the minimum wage for tipped workers to 25% below the minimum wage as long as their wages, including tips, are above that $2 minimum.

The hourly minimum wage in Arizona is currently $14.35 and increases annually according to inflation.

Massachusetts voters are being asked to eliminate a tiered minimum wage system.

There, voters will decide on a measure to incrementally raise the state's tipped worker wages — currently $6.75 an hour — until the regular minimum wage is met by January 2029. The measure was proposed by One Fair Wages, a nonprofit that works to end the minimum wage.

If voters approve the measure, the Gulf state will join seven states that currently have a single minimum wage. Michigan will soon join a group August state Supreme Court ruling A phase-out of the minimum wage has begun.

“When you're not making the money that you should be making to pay your bills, it's hard on you,” said James Ford, a longtime Detroit-based hospitality worker. “(The ruler) makes me think we're moving forward.”

Other states have wage measures on the ballot. In California, voters choose whether to Raise the hourly minimum wage from $16 to $18 What will be the highest statewide minimum wage in the country by 2026? Measures in Alaska and Missouri would gradually raise the minimum wage to $15 an hour and also require paid sick leave.

In the past two years, Washington, D.C. and Chicago have also begun to eliminate minimum wages.

Employers must ensure that employees receive the full minimum if they do not make that much with tips. But they don't always follow federal labor laws. One in 10 restaurants and bars investigated nationally by the U.S. Department of Labor between 2010 and 2019 violated a provision of the Fair Labor Standards Act, causing establishments to pay $113.9 million in back wages.

According to an AP analysis of US Census data, the problem disproportionately affects women, who make up about 47% of the US workforce but about 70% of those who work in tipped occupations.

In Arizona, Republican state Sen. JD Mesnard, the sponsor of Proposition 138, said the measure is a win for both businesses and low-wage workers.

“The employer is protected in the sense that they can preserve this lower base, knowing that there will be tips on top of it,” Mesnard said. “Tipped workers are guaranteed to make more than the minimum wage, which is more than they are guaranteed today.”

Nichols does not support this.

“It would cut into my hours, and cut into my every hour is something I don't want to lean on,” he said. “I don't believe business owners need any more cuts in labor costs.”

Proposition 138 was initially introduced in response to a ballot measure pushed by One Fair Wage that would have created a single minimum wage of $18, but the group abandoned the effort after threats of a lawsuit from the restaurant association over how it collected signatures.

Instead, One Fair Wages will focus on trying to pass a wage increase in the Legislature. Democratic state Rep. Mariana Sandoval said she hopes her party can flip the Legislature in November, where Republicans hold one-seat majorities in both chambers.

After working for tips for more than 20 years, server Lindsay Ruck, who works at a restaurant at Phoenix Sky Harbor International Airport, said she's encountered her fair share of belligerent customers. But since their tips make up a significant portion of his salary — about $60 an hour — he's hesitant to stand up to them.

Ruck, called for higher base pay – not lower.

“I think there should just be a single minimum wage and then tip people on top of that,” Rock said.

The National Restaurant Association and its state affiliates warn of fewer hours, fewer jobs and higher menu prices if employers can't count on paying their workers tips. That's why Dan Piaccadio, co-owner of Harold's Cave Creek Coral restaurant outside Phoenix, hopes voters will pass Proposition 138.

“It's a way to protect our current system that's been in place for 20 years and protect restaurant owners, keep restaurants affordable and, most importantly, keep very good wages for all tipped workers,” Piaccadio said.

Between 2012 and 2019, restaurants and the number of people employed in those restaurants grew faster in the seven states with a single minimum wage than in states with a federal minimum tipped wage, according to labor economist Sylvia Allegretto.

“We're sitting here in a state with a $16 minimum wage,” Allegretto said from Oakland, Calif., where he works at the left-leaning Center for Economic and Policy Research. “There's no minimum wage, and we've got a thriving restaurant industry.”