(The Center Square) — Councilmembers of Maryland’s Montgomery County Council have introduced a bill that, if passed, would raise the minimum wage for tipped workers to $12 per hour by July 2027, while allowing them to continue earning tips.
“Regardless of their background or ability, every worker deserves to earn a wage that acknowledges their value and dignity,” the sponsoring councilmembers wrote.
In most states, restaurant workers have a subminimum wage – $4 per hour in Montgomery County – and the rest of their income is tips.
Employers are allowed to pay their employees a subminimum wage so long as it’s high enough that their tips will bring them up to the standard minimum wage for that region or locality. (Montgomery County has adopted a higher minimum wage than the state, which takes precedence.)
But seven states and Washington, D.C., have now adopted laws that eliminate the subminimum wage, thanks in large part to the work of the organization behind the Montgomery County bill, One Fair Wage.
“Today we introduced a new bill that would fundamentally change the wages of thousands of tipped workers, a majority of whom are restaurant servers and bartenders,” the group said on social media platform X, formerly Twitter.
One Fair Wage contends that the subminimum wage has its roots in racist and sexist history and asserts that everyone deserves a reliable wage. The group also claims that a higher minimum wage doesn’t cut into tips for tipped workers.
“Tipped workers in all of the seven states that require One Fair Wage (a full minimum wage with tips on top) enjoy the same or higher tipping averages as tipped workers in the 43 states with a subminimum wage,” is fact no. 2 on OFW’s “Myths vs. Facts Fact Sheet.”
Rebekah Paxton, director of research and state coalitions for the Employment Policies Institute, says the opposite.
“In states that have eliminated tip credits [the law that allows tips to be counted toward an employee’s minimum wage] in this way, they have the lowest tipping percentages in the country – so states like California and Washington state,” Paxton told The Center Square.
Because restaurants typically operate on thin margins, most restaurant owners have to raise prices to stay afloat in places where the tip credit is being phased out. One common way this is done is through service charges. But people often misunderstand service charges, according to Paxton.
“A service charge is not a tip. A service charge is considered revenue by the restaurant, and then the restaurant can decide, ‘Yep, we’re going to disburse this for our staff, or part of this for our staff,” Paxton said. “What we’re seeing is, restaurants are saying, ‘We’re instituting this service charge as a way to adapt to higher wages.’ And a lot of that is just going to higher costs.”
The county council is set to have a public hearing on the proposed bill on Oct. 10.
