Minimum Cash Wages, Tipped Restaurant Workers, and Poverty

Joseph J. Sabia, Richard Burkhauser and Taylor Mackay

Industrial Relations: A Journal of Economy and Society, 2018, vol. 57, issue 4, 637-670

Abstract: This is the first study to examine the effect of increases in the tipped minimum cash wage—the wage employers must pay to tipped employees—on poverty. Using March Current Population Survey data (1988–2014), we find that tipped minimum cash wage increases are associated with declines in the risk of a tipped restaurant worker living in a poor family (elasticities around –0.2). However, we find little evidence of poverty‐alleviating effects when using the household rather than the family as the sharing unit. This result is consistent with evidence that a substantial share of tipped workers who live in a poor family live in a nonpoor household with persons unrelated by blood, marriage, or adoption who contribute to the household's income. Furthermore, we find that tipped minimum cash wage hikes are associated with increases in the risk of a younger, less‐educated individual living in a poor family or household. Adverse labor demand effects that redistribute income among low‐skilled individuals drive these results. We conclude that raising the tipped minimum cash wage is a poorly targeted policy to deliver income to poor restaurant workers.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1111/irel.12215

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:indres:v:57:y:2018:i:4:p:637-670

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0019-8676

Access Statistics for this article

Industrial Relations: A Journal of Economy and Society is currently edited by Christopher (Kitt) Carpenter, Steven Raphael and stevenraphael@berkeley.edu

More articles in Industrial Relations: A Journal of Economy and Society from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().