Minimum Wages and Tipped Servers

Walter Wessels

Economic Inquiry, 1997, vol. 35, issue 2, 334-49

Abstract: Tips allow restaurants to pay servers lower wages. As more servers are hired, each serves fewer meals and earns less in tips. As a result, restaurants must pay a higher wage. This gives them monopsony power over wages. Over some range, a higher minimum wage should increase employment. Empirically, the author found the full 'reverse C' monopsony pattern of employment for restaurants, with employment first going up and then down as the minimum wage is increased. Copyright 1997 by Oxford University Press.

Date: 1997
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