Hello, I'm an expert in labor economics and employment law. I'm here to provide you with a comprehensive answer to your question regarding why some servers make less than the minimum wage.

In the United States, the Fair Labor Standards Act (FLSA) allows for a lower minimum wage for employees who receive tips, known as tipped employees. This provision is designed to reflect the fact that tips are a significant part of a server's income. The rationale behind this is that the tips are expected to make up the difference between the tipped minimum wage and the regular minimum wage.

Step 1: English Answer

The tipped minimum wage is currently set at a rate of $2.13 per hour, which is significantly lower than the standard federal minimum wage. This lower wage is allowed under the premise that tips will supplement the income of the server to at least the federal minimum wage. However, there are several conditions that must be met for an employer to legally pay this lower rate:


1. The tipped employee must retain all tips: This means that the employer cannot require servers to share their tips with other employees who do not customarily receive tips, such as cooks or dishwashers.

2. **The tipped employee must customarily and regularly receive more than $30 a month in tips**: This is a threshold to ensure that the employee is indeed a tipped employee and not just an employee who occasionally receives tips.

3. **The sum of the direct wages and tips must equal at least the federal minimum wage**: If the tips plus the direct wages do not reach the federal minimum wage, the employer is required to make up the difference.

Despite these conditions, there are concerns about the tipped minimum wage system:

- Income instability: Relying on tips can lead to significant income fluctuation for servers, making it difficult to budget or plan for expenses.

- Discrimination and exploitation: There have been cases where employers do not pay the difference if tips do not meet the federal minimum wage, leading to exploitation.

- Economic disparities: Tipped workers are often concentrated in industries like food service and hospitality, which can be affected by economic downturns, leading to reduced hours and tips.

- Gender and racial disparities: Studies have shown that tipped workers, who are disproportionately women and people of color, often earn less than their non-tipped counterparts.

- Lack of benefits: Tipped workers may be less likely to receive benefits such as health insurance or paid time off, which can exacerbate financial instability.

- Enforcement issues: There can be challenges in enforcing the laws that protect tipped workers, leading to non-compliance by some employers.

Step 2: Divider

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An employer of a tipped employee is only required to pay $2.13 an hour in direct wages if that amount plus the tips received equals at least the Federal minimum wage, the employee retains all tips and the employee customarily and regularly receives more than $30 a month in tips.read more >>