Economics in Brief: New Study Argues for End of Tipped Minimum Wage
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Economics in Brief: New Study Argues for End of Tipped Minimum Wage

Demonstrators for One Fair Wage in New York in November 2020 (Photo by: John Nacion/STAR MAX/IPx)

New Study Argues for End of Tipped Minimum Wage

Ending the subminimum wage for tipped workers such as bartenders, waiters, and hairdressers would decrease poverty and inequality, a new analysis by the Center for American Progress shows.

The analysis looked at wages in the eight states that have already eliminated the tipped minimum wage — California, Oregon, Washington, Nevada, Montana, Minnesota, Alaska and Hawaii — finding that in those states workers and businesses in tipped industries “have done as well as or better than their counterparts in other states.”

As CAP points out, technically federal law requires employers to make up the difference between the tipped minimum wage, which is as low as $2.13 an hour in many states, and the actual minimum wage, which has remained at $7.25 per hour since 2009. But this law, like other laws relating to wage theft, is rarely enforced, leaving tipped employees at risk of being underpaid.

CAP looked at economic indicators in three groups of states: “low” states, which use the federal tipped minimum wage of $2.13 per hour; “mid” states, which have a higher tipped minimum wage that is still less than the prevailing minimum wage, and “one fair wage” states which have eliminated the tipped minimum wage entirely. The poverty rate, CAP said, is lower in “one fair wage” states for both tipped and non-tipped workers.

The organization also found that, contrary to a popular claim by people who support a tipped minimum wage, that implementing a “one fair wage” policy doesn’t cause customers to tip less. Tips across all three groups averaged 16 percent, CAP said. Simply living in a one-fair-wage state amounts to about a 20% increase in median wages, the organization added.

New York’s Excluded Worker Fund Is a Historic First

New York has created a $2.1 billion fund for essential workers who have been excluded from previous COVID-19 relief — the largest such fund in the history of the country, The Intercept reports.

Undocumented workers who present Individual Tax Identification Numbers (ITINs) — the ID numbers that allow undocumented people and nonresident migrants to pay federal taxes — will qualify for up to $15,600 in aid. Other workers, who can’t provide proof of employment prior to the pandemic, will only receive $3,200. The Intercept points out that “demanding documents from the undocumented” is a “burdensome paradox” but admits that New York is taking the lead in providing this aid. The next-largest relief fund for undocumented workers is going out to workers in California, which provides a one-time $1200 stimulus payment to undocumented workers making less than $75,000, and $600 to undocumented workers with higher incomes.

The negotiations in Albany to get to this point were “messy,” City and State New York reported, with legislators accusing others of flipping them the bird or name-calling, and state Sen. Gustavo Rivera of the Bronx said that he would not sponsor legislation with any lawmaker who voted against the fund. “That’s who you want to stand with? Cool, cool, cool, cool, cool, cool,” Rivera said. “I ain’t standing with you.”

Guaranteed Income for Artists Launches in St. Paul

Springboard for the Arts, an economic and community development organization in St. Paul for and by artists, is launching a guaranteed income pilot program for artists and culture workers in Minnesota’s capital city.

The modest program will provide $500 in no-strings-attached cash to 25 artists in two neighborhoods for 18 months, starting this month. Artists will be chosen randomly and there is no way to apply.

The program is one of the very few guaranteed income programs focusing on artists, Springboard said. Long Beach, California, is looking into launching one for up to 150 artists using CARES Act funds, and the Yerba Buena Center for the Arts is accepting applications through April 15 for a program that will support 130 San Francisco artists.

Back in St. Paul, “we chose to launch our pilot in [the] Rondo and Frogtown [neighborhoods] because we recognize the disproportionate economic effects of COVID over the past year, and the legacy of displacement and divestment from those communities over decades,” Caroline Taiwo, Springboard’s economic opportunity director, said in a press release. “We see this guaranteed income pilot as an opportunity to focus relief efforts on neighborhoods most impacted by the pandemic(s), and center artists from these places as creative problem solvers and key economic drivers.”

This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our Bottom Line newsletter. The Bottom Line is made possible with support from Citi.

Tags: covid-19st. pauluniversal basic incomeeconomic justiceundocumented immigrantstipped workers

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