Short-Changed: How Tipped Work Exacerbates the Pay Gap for Latinas

A woman folds laundry for a client at a laundromat in Los Angeles, October 2014.

Authors’ note: A Latinx person is any individual with Latin American roots. The term “Hispanic” refers to all Spanish-speaking people, including those from Spain. This piece uses “Hispanic” and “Latina” to reflect the underlying data source. The U.S. Census Bureau specifically asks if respondents identify as Spanish, Hispanic, or Latino in the Survey of Income and Program Participation survey, which was used for the analysis of income (including tips) in this column.

November 20 marks Latina Equal Pay Day—the estimated 2019 date until which a Latina who works full time, year round must work in the current year to make as much as the amount a white, non-Hispanic man working full time, year round earned in the previous year alone.* Last year, Latinas made 54.5 cents for every dollar earned by white, non-Hispanic men.

A significant part of the wage gap can’t be accounted for by factors such as differences in educational attainment or seniority at work, and experts most often attribute the gap to discrimination. According to a recent Pew Research Center survey, 6 in 10 Hispanic adults in the United States have experienced discrimination, with 26 percent specifically noting unfair treatment in hiring, pay, or promotion. Discrimination is more prevalent for Hispanic Americans who self-identify as having darker skin. The combined effect of multiple forms of bias—such as discrimination based on gender, ethnicity, and race—can create even more harm for women of color in the labor market. Many Latinas report experiencing discrimination in workplaces across the country.

Another substantial driver of pay inequality is occupational segregation, meaning the systemic funneling of women, particularly different groups of women of color such as Latinas—into low-wage occupations. Occupational segregation belies the idea that workers can improve their jobs and wages with more training and education; workers in low-wage occupations,  in which workers are predominantly women, are better educated than workers in other low-wage occupations, but their hourly earnings are lower.

Achieving equal pay will require robust policy solutions that support women and their families; improve equal pay laws and protections; strengthen anti-discrimination law and enforcement; and build an equity-focused workforce system. One clear area for improvement—a way to narrow the wage gap and move toward an earlier Latina Equal Pay Day in 2021—would be to eliminate outmoded and discriminatory exceptions to the federal minimum wage.

The subminimum wage for tipped workers perpetuates the pay gap and workplace harassment

At the federal level, tipped workers currently receive just $2.13 per hour from their employer, compared with $7.25 per hour for nontipped workers. While employers are required by law make up the difference when their tips don’t reach the standard minimum wage, in practice, that rarely happens and is nearly impossible to enforce.

According to new analysis of the wide range of income sources described in the most recent wave of the Survey of Income and Program Participation (SIPP), workers who indicate that they receive tips at one or more of their jobs have lower wages than workers who do not receive tips, controlling for race/ethnicity and gender. The median monthly income of a Hispanic or Latina tipped worker is 35 percent of the median monthly income of a nontipped white, non-Hispanic man. Only examining tipped workers, tipped Hispanic or Latina workers make 30 percent less than tipped white, non-Hispanic men and 23 percent less than tipped white, non-Hispanic women.

Women are more likely than men to be tipped workers: 2.6 percent of women in the labor force receive tips in one or more of their jobs, compared with 1.5 percent of all men. Hispanic women and Latinas are more likely than Hispanic men and Latinos are to work for tips, and they are nearly twice as likely to work for tips as white, non-Hispanic men. It should be noted that federal-level data on tipping and tipped workers is difficult to obtain reliably. These data could undercount those who work for tips, since the SIPP relies on respondents’ voluntary reports of their income, but it provides more detail on tipped workers than other data sources.

Tipped workers are simultaneously beholden to their customers for tips and dependent on their employers to fairly calculate the difference between their actual and expected wages. Those power dynamics foster a culture that makes tipped workers more likely to experience sexual harassment, abuse, and discrimination from both customers and employers as well as others in the workplace with more power. The added effect of biases about women of color too often subjects them to increased discrimination. It’s impossible to measure the true scope of sexual harassment and other violations that go unreported, given that survivors tend to underreport for reasons including but not limited to a fear of workplace reprisal and a belief that the justice system will not get them the justice they seek. Even with significant underreporting, accommodations and food-service workers account for 1 of 7 sexual harassment charges filed with the U.S. Equal Employment Opportunity Commission between 2005 and 2015.

Opportunities to strengthen protections for tipped workers and combat efforts to decrease workers’ power

The U.S. Department of Labor (DOL) has long enforced the so-called 80/20 rule, which requires employers to pay the full minimum wage—$7.25 instead of $2.13—when workers spend more than 20 percent of their time on nontip-generating work. In October 2019, the Trump administration proposed a rule that would diminish the number of hours employers are required to have tipped workers spend on customer-facing work without reclassifying those workers to receive a higher wage, meaning that workers’ tip-generating hours—and their wages—will likely decrease.

The DOL’s  own investigation found that 84 percent of restaurants investigated in a 2010–2012 compliance sweep violated wage and hour laws, and wage theft is rampant in tipped industries. This proposed rule would make it even easier for employers to take advantage of tipped workers.

Latina Equal Pay Day should remind lawmakers of their power to raise wages. Both the Raise the Wage Act, which would raise the federal minimum wage and eliminate the subminimum wage for tipped workers and workers with disabilities, and the Paycheck Fairness Act, which would strengthen equal pay protections and combat gender pay discrimination, have passed the U.S. House of Representatives, but they languish in the Senate.

Maintaining current requirements for the amount of tipped work available to workers who rely on tips will help ensure that these workers don’t slip farther behind. Eliminating the subminimum wage would be a vital step toward achieving pay equity for Latinx workers and a victory for all who depend on tips.

Lily Roberts is the director of Economic Mobility at the Center for American Progress. Galen Hendricks is a research assistant for Economic policy at the Center.

*Note: The date for Latina Equal Pay Day 2019 was calculated and set before the September 2019 release of the 2018 U.S. Census Bureau data. Calculations were based on U.S. Census Bureau’s 2017 Current Population Survey, Annual Social and Economic Supplement, Table PINC-05.