The US Department of Labor (DOL) wants to do away with tips, by making it legal for employers to pool their workers’ tips as long as they’re paid minimum wage. But the proposed policy is contentious—no one can agree what happens to the tips, once they’re pooled.
At first blush, tip pooling seems egalitarian. Danny Meyer, the CEO of Union Square Hospitality Group and the mind behind some of New York’s most important restaurants, eliminated tipping at his ventures in 2015. When you tip, you’re only rewarding the server who brought you food, while overlooking the chef, cooks, and washers—everyone in the kitchen—who toiled to produce it in the first place. Tipped employees are making about 300% of what they made 31 years ago. Over the same time, kitchen staff have seen their incomes rise by about 20%.
The DOL has adopted this line of thinking. But there are reasons to be suspicious of the new proposed tip-pooling rule—and of tip-pooling in general. For one, the DOL has not mandated that once an employer collects tips, she has to distribute them amongst her staff. There’s also evidence that, illegally, employers already pocket tips: research on waiters in Chicago, Los Angeles, and New York found that 12% of tipped workers had tips thieved by a supervisor. This is partly why, in 2011, the Obama administration made tip-pooling with back-of-house workers illegal.
According to the Bureau of Labor Statistics, waiters and waitresses are some of the poorest paid workers in the US, making, on average, $9.61 an hour. But among some of America’s lower-income workers, who is hurt the most?
Analysis from the Economic Policy Institute, a left-leaning think tank, suggests that women and hispanic workers have the most to lose from the DOL’s tip-pooling rule. The EPI estimates tipped workers would lose $5.8 billion in tips to employers if the rule passes, and nearly 80% of that loss would fall on female staff.