Waiting for Change: The two tiered wage system Sylvia A. - PowerPoint PPT Presentation

Waiting for Change: The two tiered wage system Sylvia A. Allegretto, PhD Co-chair: Center on Wage & Employment Dynamics Institute for Research & Labor Employment University of California, Berkeley

$8.00 Federal MW $7.25 $7.00 $6.00 $5.00 Tip credit $5.12 $4.00 $3.00 40% $2.00 Tipped wage $2.13 50% $1.00 $0.00 Allegretto 2013

$10.00 $9.00 $8.00 $7.00 $6.00 $5.00 Customer portion of the wage bill is 71% $4.00 $3.00 $2.00 Employer part of the $1.00 wage bill is 29% $0.00 Allegretto 2013

Allegretto 2013

Tip Credit Tipped Wage $10 $9.19 $9 $8.25 $8.00 $8 $7.25 $7.25 $7 $2.56 $6 $3.62 $5.37 $5 $5.12 $9.19 $4 $3 $5.69 $2 $3.63 $2.63 $1 $2.13 $0 Federal Massachusetts Maryland Connecticut Washington State Allegretto 2013

180% 170% Full-service restaurants 160% Private sector 150% 140% 130% 120% 110% 100% 90% 80% Source: BLS QCEW data. Allegretto 2013

140% Private employment 120% Limited service restaurants 100% 80% 60% 40% 20% 0% Source: QCEW 1990q1 to 2011q4. Allegretto 2013

60% Total workforce Tipped workers 50% Waiters 40% 30% 20% 10% 0% Under 20 20 to 29 30 to 39 40 to 49 50 or older Source: Allegretto & Filion, EPI 2011. BLS CPS data.

80% 72.4% 68.0% 70% 60% 51.4% Male 48.6% 50% Female 40% 32.0% 27.6% 30% 20% 10% 0% All workers Tipped workers Waiters Source: Allegretto & Filion, EPI 2011. BLS CPS data.

$20 $18 $17.25 $15.59 $16 All $14.24 $14 Male $12 Female $10.22 $9.87 $9.87 $9.72 $10 $9.22 $9.04 $8 $6 $4 $2 $0 All workers Tipped workers Waiters Source: Allegretto & Filion, EPI 2011. BLS CPS data.

25% Full Tip Credit Partial Tip Credit 19.4% 20% No Tip Credit 16.2% 16.1% 14.6% 15% 13.5% 12.1% 10% 6.7% 6.7% 6.0% 5% 0% All workers Tipped workers Waiters Source: Allegretto & Filion, EPI 2011. BLS March CPS data.

18% 15.7% 16% 14.5% 14% 12% 10% 8.4% 8% 6% 4% 2% 0% Private Sector Restaurant Industry Tipped workers Source: BLS CPS data Allegretto 2013

80% 71% Private sector 70% 65% 62% Acc & Food Svcs 60% 50% 37% 40% 32% 29% 30% 20% 10% 0% Health care Paid sick days Retirement Source: BLS NCS data. Allegretto 2013

 Papers on TW and/or Tip Credit Provisions:  Even & Macpherson. IZA DP No. 7092, 2012 ▪ Pledged by unobserved heterogeneity as in MW literature.  Anderson & Bodvarsson. Applied Economic Letters , 2005 ▪ Higher TW doesn’t boost pay; one year of data.  Wessels. Economic Inquiry , 1997 ▪ Labor market for tipped wait staff is monopsonistic.  Wessels. Journal of Labor Research , 1993 ▪ Uses one year of retail data to show restaurant employment & hours would decrease significantly if the TC were reduced.  Look to recent MW studies  Allegretto, Dube, Reich. Industrial Relations , 2011  Dube, Lester, Reich. ReStat, 2 010

 QCEW: 1990-2010  Each observation is merged with State data ▪ Unemployment rates: capture labor market conditions ▪ Relevant shares : capture labor supply ▪ MW, TW and TC: treatment & variables of interest Allegretto WEAI 2011

Spec. 1 𝑚𝑚𝑚 𝑗𝑗 = 𝛽 + 𝜸 𝟐 ln ( 𝑁𝑁 𝑡𝑗 ) + 𝜸 𝟑 ln ( 𝑈𝑁 𝑡𝑗 ) + 𝛿 ln ( 𝑄𝑄𝑄 𝑡𝑗 ) + θ ln ( 𝑄𝑄𝑄 𝑡𝑗 ) + 𝝔 𝒕 + 𝝊 𝒖 + 𝜁 𝑡𝑗 Spec. 2 𝑚𝑚𝑚 𝑗𝑗 = = 𝛽 + ………… ………… + 𝝔 𝒕 + 𝝊 𝒆𝒖 Spec. 3 𝑚𝑚𝑚 𝑗𝑗 = = 𝛽 + ………… ………… + 𝝔 𝒕 + 𝝎 𝒕 · 𝐮 + 𝝊 𝒖 Spec. 4 𝑚𝑚𝑚 𝑗𝑗 = = 𝛽 + ………… ………… + 𝝔 𝒕 + 𝝎 𝒕 · 𝐮 + 𝝊 𝒆𝒖

Spec. 1 𝑚𝑚𝑚 𝑗𝑗 = 𝛽 + 𝜸 𝟐 ln ( 𝑁𝑁 𝑡𝑗 ) + 𝜸 𝟑 ln ( 𝑈𝑁 𝑡𝑗 ) + 𝛿 ln ( 𝑄𝑄𝑄 𝑡𝑗 ) + θ ln ( 𝑄𝑄𝑄 𝑡𝑗 ) + 𝝔 𝒕 + 𝝊 𝒖 + 𝜁 𝑡𝑗 Spec. 2 𝑚𝑚𝑚 𝑗𝑗 = = 𝛽 + ………… ………… + 𝝔 𝒕 + 𝝊 𝒆𝒖 Spec. 3 𝑚𝑚𝑚 𝑗𝑗 = = 𝛽 + ………… ………… + 𝝔 𝒕 + 𝝎 𝒕 · 𝐮 + 𝝊 𝒖 Spec. 4 𝑚𝑚𝑚 𝑗𝑗 = = 𝛽 + ………… ………… + 𝝔 𝒕 + 𝝎 𝒕 · 𝐮 + 𝝊 𝒆𝒖

Specification (1) (2) (3) (4) Earnings lnTW η 0.044** 0.037* 0.055*** 0.045** se (0.018) (0.021) (0.014) (0.017) lnMW η 0.152*** 0.136*** 0.136*** 0.127*** se (0.029) (0.042) (0.030) (0.026) Employment lnTW η -0.094** -0.013 -0.008 -0.012 se (0.040) (0.042) (0.038) (0.046) lnMW η -0.114** -0.027 -0.073** -0.026 se (0.055) (0.066) (0.034) (0.058) Y Y Division-specific time controls State-specific time trends Y Y Source: Aggregated QCEW data 1990q1-2010q4. Note: Significance *** p<0.01, ** p<0.05, * p<0.1 Allegretto 2013 Other controls: U Rates, POP, EPOP, % College Degree, personal income

 The MW and TW  Can certainly be increased at federal level without negative effects.  The paid wage matters to tipped workers  More work to look closely at states with No TC ▪ Perhaps labor-labor substitution  Policy areas  Reconnect TW to MW as in H-M Bill (70%)  Other policies such as paid leave, address JIT, low- to-no benefits. Allegretto 2013