Diners are pulling back on tipping, but waiters and table bussers are still coming out narrowly ahead.
From January 2020 to September this year, base wages — what staffers get paid directly by their bosses, before any tips — jumped 66%, according to findings released Tuesday by private-sector payroll processor ADP. Gratuities rose only 23%. The study analyzed the paychecks of nearly 100,000 tip earners at full-service restaurants nationwide.
Restaurant workers earned a median hourly pay of $23.88 from wages and tips combined as of September, up 28% since January 2020. Because consumer prices rose 22% during that same period, the data shows these workers’ overall income growth beat inflation by 6 percentage points — while their tips outpaced it by just 1.
A separate report released Tuesday by the payments processor Toast found tips at full-service restaurants have been roughly flat since June. They averaged $21.48 per hour as of September, only 58 cents more than the same time a year earlier — but about 7 cents less when adjusted for inflation.
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Like many recent economic trends, restaurant workers’ pay gains are closely linked to the pandemic: Operators hiked wages to coax workers back as they reopened and found they generally couldn’t lower wages once they’d raised them, said Nela Richardson, ADP’s chief economist.
Many industry staffers “were able to aggressively see base salaries increase,” she said. “There was a lot more negotiation power for these workers over time.”
Today, more than 57% of the median-earning restaurant worker’s income comes from tips — still a big chunk, but down from nearly 65% in January 2020, ADP found. That falling share could matter for debates around whether to cut taxes on tips, an idea that drew bipartisan support on the campaign trail even as broader minimum wage battles heat up.
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In the meantime, the findings are a corrective to widespread complaints about so-called tipflation, with consumers increasingly being asked — often by automated prompts on the screens of payment processors — to tip when they may or may not feel it’s warranted. But despite an early, modest uptick in tipping during the pandemic recovery, many people have consistently shown no difficulty declining requests to add gratuities.
In fact, consumers have said at least since this summer that they’re pulling back on how often they tip workers like waiters, hairstylists and drivers. A new Wells Fargo survey finds only half of Americans plan to give holiday tips or gifts to service workers this season.
The tipping slowdown comes even as restaurants ease up on hiking menu prices and lean into discounts to keep luring guests to tables and drive-thrus. Inflation overall has settled just above 2% as 2024 winds down, far below its peak north of 9% in June 2022. But as consumers’ tipping habits have evolved in recent years, so have restaurant owners’ pay offers and lawmakers’ rules governing them.
“Workers have been winning in the marketplace,” said Saru Jayaraman, president of One Fair Wage, an advocacy group that campaigns for higher base pay. “Winning in the marketplace has resulted in us being able to win in policy.”
Jayaraman cited Michigan, where the state Supreme Court last summer cleared the way for a minimum wage hike, from $10.33 to $12.48 to take effect in February 2025. At least 26 states and Washington, D.C., have implemented minimum wage hikes over roughly the last year, according to the Economic Policy Institute, while 20 have raised their tipped wage.
The tipped wage, also known as a “subminimum” wage, allows tip earners to be paid a lower hourly rate but requires employers to cover any shortfalls whenever gratuities don’t add up to either the $7.25 federal pay floor or a higher statewide one. Michigan’s new law gradually raises the state subminimum until it’s phased out in 2029.
“Michigan was the biggest win this year,” Jayaraman said. “I would say we’re on a roll.” Advocates have notched similar victories recently in New York City, Los Angeles and Chicago, and Jayaraman said her group’s next big target is Illinois, where a bill to eliminate the state’s subminimum wage has been working its way through the legislature.
To be sure, most full-service restaurant workers still rely heavily on tips for their income, and industry operators largely want to keep it that way. Many argue that their labor costs have already surged unsustainably — a reality the ADP findings appear to back up — especially squeezing small restaurants that run on thin margins. Still, Arizona voters last month soundly defeated an industry-backed ballot measure that would have slashed the minimum wage as long as tips hit a designated new threshold.
ADP found subminimum pay rules have indeed kept workers afloat at times when gratuities collapsed, just as the system is designed. In the first half of 2020, “when tips dried up during pandemic lockdown, base wages rose, thanks to laws that require employers to make up for the loss of tipped wages,” the researchers wrote. But “as tips recovered, base wages fell quickly to pre-recession levels. A year later, base wages spiked again, just not enough to overtake tips.”
It remains to be seen how the decline in gratuities’ share of industry workers’ income might affect any move to eliminate taxes on tips, as President-elect Donald Trump has promised. Richardson said the impact of the proposal — which service workers and labor groups didn’t rank too highly during the campaign season — would depend on the details.
“What we can say is that the base has now become a more impactful part of overall compensation for restaurant workers,” she said. “That’s going to be really meaningful for a whole host of reasons.”
CORRECTION: A previous version of this article misstated the time period for restaurant workers’ 66% wage growth. That increase occurred between January 2020 and this September, not from January 2019.
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