Tip penalty proposal in Minnesota House threatens economic security

The economic security of workers who receive hourly wages and tips in Minnesota is threatened by House File 4061, which was the subject of a hearing in the House Job Growth and Energy Affordability Policy and Finance Committee earlier this week.

Minnesota is one of seven states that ensures that workers who receive tips earn the same minimum wage as most other workers. The minimum wage for large employers is currently $9.65 per hour and, importantly, increases with inflation each year to help keep up with the cost of living.

House File 4061 would set a separate, lower minimum wage for workers, such as restaurant servers, who receive about $4.00 per hour or more in tips on average in a work week. The minimum wage for these workers would be frozen at the current minimum wage, and would not increase with inflation in future years. This policy is bad news for a few reasons:

  • While the wages for other low-wage workers would increase each year to help keep up with the cost of basic necessities like child care, groceries, and rent, workers receiving tips would be stuck earning 2018-level wages. And the gap between what tipped workers earn and what it takes to make ends meet would grow larger over time.
  • A substantial number of Minnesotans work in tipped positions at some point, and could be harmed by this proposal. According to the JOBS NOW coalition, openings for food preparation and serving jobs are up by 200 percent compared to four years ago.
  • This bill would make it very hard for workers to keep track of how much they should actually be paid by their employers, making workers more susceptible to wage theft. Since earnings could vary weekly between the inflation-adjusted minimum wage and the tip penalty wage, workers who receive tips right around $4 an hour on average would need to diligently track their tips and scrutinize their paychecks to make sure they’re being paid correctly. At the same time, it would also add a layer of complexity for employers to ensure they’re conforming to the law and counting tips and wages accurately.

The minimum wage sets a wage floor, and for tipped workers it provides a certain level of stability. This bill would erode the progress Minnesota workers made in 2014 when policymakers passed a long overdue raise to the state’s minimum wage. That boost to the state’s minimum wage is bringing more than 300,000 Minnesotans closer to economic security, and supports workers who are most often left behind in the state’s economy, including workers of color and women.

But House File 4061 would undo some of this important work. Policymakers should support Minnesota workers and promote economic security, not pass legislation that suppresses wages.

-Clark Goldenrod

About Clark Goldenrod

Clark Goldenrod is the Minnesota Budget Project's senior policy analyst.
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