The Subminimum Wage

What it is

The "subminimum wage" is the legal carve-out that lets employers pay tipped workers below the regular minimum wage, on the theory that tips will make up the difference. Federally, the tipped subminimum is $2.13/hour. It has been at that rate since 1991 — and was permanently decoupled from the regular minimum wage in 1996, when Congress raised the regular wage but left $2.13 in place. The cost of food, rent, and gas has roughly doubled since.

Forty-three states still allow some version of the subminimum tipped wage. Seven states — Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington — pay tipped workers the full state minimum wage plus tips, with no tip credit allowed under any circumstances. Restaurants in those states don't close at higher rates; they thrive at higher rates. OFW's comparative research documents the gap in detail.

What the public actually thinks

The subminimum wage — one of the central restaurant workers’ rights issues in the U.S. — the subminimum wage isn’t politically controversial. The polling is overwhelming:

• 66% of major-city voters support a $30 minimum wage (+45 margin) per Lake Research Partners’ October 2025 cross-city study. 73% support ending the tipped subminimum wage (+58 margin).
• 80% of Black voters, 73% of Latino voters, and 72% of women support a $30 minimum wage — the strongest demographic groups behind the policy.
• 55% of voters in 18 toss-up Cook Political Report swing districts support a $25 minimum wage, growing to 57% after engaged debate. The opposition arguments fail in competitive territory.
• 62% of U.S. adults favor a $15 federal minimum wage (40% strongly), per Pew Research (April 2021). Even 71% of those who oppose $15 still favor some increase.
• 61% of small business owners support raising the minimum wage, per CNBC polling (February 2024). Half of all small business owners agree their employees should be paid more.
• Worker support runs higher than voter support — 96% of surveyed Maryland tipped workers, 95% in the expanded sample, 88% of DC restaurant workers, and 82% of NY restaurant workers support a full minimum wage with tips on top. (OFW surveys; Lake Research Partners; sources catalogued in our research library.)

What the opposition says — and what the data shows

The National Restaurant Association runs the same three arguments against every state and city campaign to end the subminimum wage. They’re what we hear in every hearing, every op-ed, every TV interview. Here’s the data that answers them — including what happens when voters hear both sides in engaged debate.

Attack #1: “Wage increases cause job losses.”

What the data shows:

• Restaurant employment grew 31% faster in fair-wage states than in subminimum states between 2021–2023 (17% vs. 13%), per BLS QCEW.
• FL restaurant employment grew 29% while tipped wages rose from $5.54 to $9.98 (2020–2024). IL grew 34% while tipped wages rose from $5.50 to $9.00.
• Cornell’s 20-year study (Lynn, 2015) found mandated wage increases “have not had large or reliable effects on the number of restaurant establishments or industry employment.”
• D.C. hit an all-time employment record of 30,633 full-service restaurant workers in April 2025 — the highest in 35 years of recordkeeping. 6 of the top 10 employment months in D.C. history occurred since I-82 wage increases began.
• Chicago: 856 new restaurant licenses issued by City of Chicago BACP since the ordinance took effect in July 2024. License renewals unchanged. License cancellations DOWN 50% in 2024 vs. 2023.
• The actual driver of restaurant job loss: 76% of workers cite low wages as their #1 reason for leaving the industry. 78% say a livable wage would make them stay. The staffing crisis is caused by wages being too low — not by raising them.
• When Chicago voters heard this argument in engaged debate, support for $30 went UP from 67% to 70%. When swing-district voters heard it, support went up from 55% to 57%, with strong support jumping 10 points.

Attack #2: “Wage increases raise prices and fuel inflation.”

What the data shows:

• EPI analysis of the Raise the Wage Act: a maximum 0.5% one-time price level boost, fading to near-zero within 5 years. The Federal Reserve Bank of Boston (2017) measured it directly: a 10% minimum wage increase = 0.3 percentage point dining-out cost increase.
• Chicago after the ordinance: labor costs increased only 3% despite an 8% base wage increase — roughly equal to inflation. (NBC Chicago + Square data.)
• Illinois restaurant worker income rose 29% (2020–2023) vs. 19% inflation — wage growth outpaced inflation.
• $1 minimum wage raise = $700 in additional annual consumer spending per household (Federal Reserve Bank of Chicago) — the same workers spend the raise locally.
• 3 of the 7 fair-wage states are in the top 10 nationally for per-capita dining spending. D.C. is #1 in the nation at $10,291/year per resident. Higher wages don’t kill dining culture — they fund it.
• The honest accounting on inflation: profit margin expansion drove ~40% of post-pandemic price increases — 3x the normal contribution of profits to inflation (OFW analysis, August 2022). The story being told about wages is being told to distract from where the money actually went.
• When Chicago voters heard this argument in engaged debate, support for $30 still went UP. Blue-collar voters in focus groups don’t buy the wages-cause-inflation framing — they call wage increases a top answer to inflation.

Attack #3: “Tipped workers prefer the current system. Tips will decline.”

What the data shows:

• 96% of restaurant workers support One Fair Wage. 99% of women of color. Near-universal (OFW survey, Unlivable, 2022).
• 88% of D.C. restaurant workers supported the $15 tipped minimum wage before I-82 passed. 82% of NY restaurant workers support it. 80% in DE/ME/NH. Worker preference is documented and overwhelming.
• Tips are higher in fair-wage states, not lower. California is the #1 state in the country for tips — while paying the full minimum wage as the base. (USA Today / Toast data.)
• Chicago after the ordinance: tipped worker base wages more than doubled and tips still grew 37% (ADP Research). Toast data: California tips per hour increased 5.8%.
• The “high-earning server” talking point is false for the actual workforce: 99.21% of tipped restaurant workers earn under $100,000/year. Median tipped income is just 37% of the national median ($15,619 vs. $42,220). 48% earn below the federal income tax threshold.
• Tip dependence creates the harassment crisis: tipped workers face sexual harassment at 76% vs. 52% for non-tipped workers. Sexual coercion is nearly 3x as common (39% vs. 14%). Workers don’t “prefer” a system that produces those numbers.
• National tipping rate hit a 6-year low (19.3%) in 2024 with no policy change. Tips are already declining under the current system. The threat isn’t the policy — it’s the status quo.
• When voters heard the “tips will decline for tipped workers” argument in engaged debate, support for the policy INCREASED. NYC: 88% of Black voters support ending the subminimum wage — the communities most affected are the most supportive.

A pattern across the three: when the National Restaurant Association’s arguments are presented to voters next to OFW’s response, the policy gains support. Every time. Source: Lake Research Partners polling, Chicago and swing-district October 2025 studies.

On “No Tax on Tips”

The federal “No Tax on Tips” bill that passed the U.S. Senate makes a poverty wage tax-free. It does not raise the floor. 66% of tipped workers make too little to benefit from the proposed tax exemption.

“If Democrats want to offer a true alternative, they need to say it loud and clear: it’s time to raise the minimum wage and end the subminimum wage once and for all.” — Saru Jayaraman, President, One Fair Wage (Common Dreams, on the Senate-passed No Tax on Tips bill)

OFW supports Rep. Steven Horsford’s (D-NV) TIPS Act — which would eliminate the subminimum wage and end taxes on tips. That’s the version of “no tax on tips” that actually helps workers, because it pairs the tax cut with a livable base wage. A tax cut on a poverty wage is still a poverty wage.

Where it comes from

The tipped subminimum wage isn't an economic policy. It's a racial one. After Emancipation, formerly enslaved Black workers were channeled into "tipped" service jobs — Pullman porters, hotel staff, restaurant workers — where employers paid them nothing and told them to live off whatever customers chose to give. When the Fair Labor Standards Act of 1938 set a federal minimum wage, the restaurant industry lobbied successfully to exclude tipped workers entirely. Tipped workers didn't get any federal wage floor until 1966. The $2.13 figure was set in 1991, and the 1996 minimum-wage hike decoupled tipped pay from the regular floor — leaving $2.13 frozen there ever since. Congress hasn't revisited it in nearly three decades.

OFW's reports "A Persistent Legacy of Slavery" and "Ending a Legacy of Slavery" walk through this history in full.

Who it harms

Tipped workers — and disproportionately women and workers of color

The U.S. tipped workforce is roughly two-thirds women and disproportionately Black, Latina, and immigrant. Tipped workers are twice as likely to live in poverty as the rest of the workforce, and three times more likely to need food stamps. Multiple OFW reports document the wage gap by race within tipped occupations — even in the same restaurant, on the same shift.

Anyone in a restaurant — because harassment runs on tip dependency

When your income depends on a customer's discretion, you put up with what you have to put up with to make the rent. As Saru Jayaraman wrote in Forked (2016): "Women who work in states that pay a lower, tipped minimum wage of $2.13 an hour experience sexual harassment at twice the rate of women who work in the equal treatment states." OFW's research ("Take Your Mask Off So I Know How Much To Tip You," "Are You Being Served?", "We Are Not On The Menu") documents exactly how the subminimum wage structurally enables harassment.

Small restaurants — because turnover is the actual industry crisis

The restaurant industry's loudest complaint right now is a "worker shortage." OFW's research shows it's a wage shortage. Restaurants paying the subminimum wage cycle through staff at rates that would bankrupt any other industry. The High Road operators paying fair report turnover at a fraction of industry average.

Customers — through worse service, worse food safety, and the fight at the table

Tipped workers themselves report that they pressure each other to ignore food-safety protocols when a customer's mood is on the line. Tip-based pay also makes tip-pooling fights a daily backstage feature of restaurant work — driving the friction that customers eventually feel.

How we end it

We are fighting for a living wage for all. The movement to win a living wage for everyone is led by restaurant workers, who are fighting to end the subminimum wage for tipped workers — and One Fair Wage leads that work as convener and operational lead of the Living Wage For All coalition, now more than 100 organizations strong. See the national campaign at livingwageforall.org.

• State campaigns. OFW leads or co-leads active campaigns to end the subminimum wage in California, New York, Illinois, Maryland, Michigan, Connecticut, and Washington D.C. See the state campaign hub.
• The federal Living Wage For All Act. Rep. Delia Ramirez (IL-03), with 30 House cosponsors including Mejía (NJ-11), García (IL-04), Khanna (CA-17), Jayapal (WA-07), Casar (TX-35), and Tlaib (MI-12), introduced H.R.8555 in the 119th Congress: a $25 federal floor, phased in by company size (large employers by 2031, smaller by 2038), with no subminimum wage carve-outs. Indexed thereafter to two-thirds of the national median wage. The bill is the federal end-game for this fight. OFW wrote it with the Living Wage For All coalition — 100+ organizations OFW convened in 2025. Public launch at the U.S. Capitol was April 28, 2026. See livingwageforall.org/federal.
• RAISE High Road Restaurants. Demonstrating in practice that the fair-wage model works — restaurant by restaurant, market by market. See the RAISE High Road program.
• Worker services. Worker rights information and referrals, English For Restaurant and Service Workers, and low-cost Just Safe Food certification — so workers can survive the current system while we change it. See For Workers.