Mel Nichols, a 37-year-old bartender in Phoenix, Arizona, earns between $30 and $50 per hour, including tips. However, the uncertainty of her daily earnings is a constant source of stress for her.
“For every good day, there’s three bad days,” said Nichols, who has worked in the service industry since her teenage years. “You have no security when it comes to knowing how much you’re going to make.”
This uncertainty stems from federal labor law, which allows businesses to pay tipped workers, such as food servers, bartenders, and bellhops, less than the minimum wage as long as customer tips cover the difference. Arizona and Massachusetts voters will decide in November whether it’s appropriate to continue allowing employers to pass a portion of their labor costs onto consumers.
The ballot measures reflect a growing debate about the so-called subminimum wage. Advocates argue that it’s essential for the service industry’s sustainability, while opponents claim it shifts labor costs away from employers and leads to worker exploitation.
The amount tipped workers earn varies by state. Fourteen states pay the federal minimum, or just over $2 per hour for tipped workers and $7 per hour for non-tipped workers.
Arizona employers are permitted to pay their tipped workers $3 less per hour than other workers. Under current rates, this means tipped workers’ base pay is $11.35 per hour.
Voters will decide whether to approve a measure supported by Arizona Republicans and the Arizona Restaurant Association to adjust the minimum wage for tipped workers to 25% less than the regular minimum wage as long as their earnings with tips exceed that minimum by $2.
The hourly minimum wage in Arizona is currently $14.35 and increases annually with inflation.
Massachusetts voters are being asked to abolish the tiered minimum-wage system.
There, voters will decide on a measure to gradually increase the state’s tipped worker wage — currently $6.75 per hour — until it reaches the regular minimum wage by January 2029. This measure was proposed by One Fair Wage, a non-profit organization working to eliminate the subminimum wage.
If voters approve the measure, Massachusetts would join seven states that currently have a single minimum wage. Michigan will soon join this group after implementing a phase-out of the subminimum wage.
“When you’re not making the money that you should be making to pay your bills, it becomes hard on you,” said James Ford, a longtime Detroit-based hospitality worker. ”(The ruling) makes me think we’re moving forward.”
Other states have wage measures on the ballot. In California, voters will determine whether to increase the minimum wage to $18 per hour by 2026, which would be the highest statewide minimum wage in the country. Measures in Alaska and Missouri would gradually raise minimum wages to $15 per hour while also requiring paid sick leave.
In the past two years, Washington, D.C., and Chicago have also begun to eliminate the subminimum wage.
Employers are required to ensure that workers receive the full minimum wage if they don’t earn that amount through tips. However, they don’t always comply with federal labor law. One in 10 restaurants and bars investigated nationwide by the U.S. Labor Department between 2010 and 2019 violated a provision of the Fair Labor Standards Act, resulting in these establishments paying $113.9 million in back wages.
This issue disproportionately affects women, who constitute about 47% of the U.S. workforce but nearly 70% of those working in tipped professions, according to an AP analysis of U.S. Census data.
In Arizona, Republican state Sen. J.D. Mesnard, the sponsor of Proposition 138, said the measure is a win for both businesses and lower-wage workers.
“The employer is protected in the sense that they can preserve this lower base, knowing that there are going to be tips on top of it,” Mesnard said. “The tipped worker is guaranteed to make more than minimum wage, which is more than they’re guaranteed today.”
Nichols does not support this measure.
“It would reduce my hourly, and anything that reduces my hourly is not something that I want to lean into,” she said. “I don’t believe that business owners need any more cuts in labor costs.”
Proposition 138 was initially proposed as a response to a ballot measure advocated by One Fair Wage that would establish a single minimum wage of $18. However, the group abandoned this effort after facing threats of litigation from the restaurant association regarding their signature collection methods.
Instead, One Fair Wage will focus on attempting to pass a wage increase in the Legislature. Democratic State Rep. Mariana Sandoval said she hopes her party can overturn the Legislature’s current Republican majority in both chambers in November.
After working for tips for over 20 years, server Lindsay Ruck, who works at a restaurant at Phoenix Sky Harbor International Airport, said she has encountered her share of difficult customers. However, since their tips comprise a significant portion of her pay — roughly $60 per hour — she is hesitant to confront them.
Ruck believes that a higher base pay, not a lower one, is necessary.
“I think that there should be just a single minimum wage and then people should get tipped on top of that,” Ruck said.
The National Restaurant Association and its state affiliates warn of reduced hours, lower employment, and menu price increases if employers cannot rely on tips to pay their workers. This is why Dan Piacquadio, a co-owner of Harold’s Cave Creek Corral restaurant outside Phoenix, is hoping voters approve Proposition 138.
“This is just a way to protect our current system that’s been there for 20 years and protect restaurant owners, keep restaurants affordable, and most importantly, keep very good pay for all tipped workers,” Piacquadio said.
Between 2012 and 2019, the number of restaurants and restaurant employees grew at a faster rate in the seven states with a single minimum wage compared to states paying the federal minimum tipped wage, according to labor economist Sylvia Allegretto.
“We are sitting here in a state that has a $16 minimum wage,” Allegretto said from Oakland, California, where she works at the left-leaning Center for Economic and Policy Research. “No subminimum wage, and we’ve got a thriving restaurant industry.”