The Tipped Minimum Wage Is Still $2.13 (Since 1991)

The tipped minimum wage is the oddest number in American labor law. It is $2.13 an hour, it covers millions of restaurant, bar, and service workers, and it has sat still longer than most of its workers have been alive.

What is the tipped minimum wage?

It is the lowest direct cash wage an employer may pay a worker who regularly receives tips, usually more than $30 a month under the Fair Labor Standards Act. The federal figure is $2.13 an hour. The law lets the employer take a "tip credit" of up to $5.12 an hour, which brings the total to the full $7.25 only if tips cover the rest.

If they do not, the employer owes the gap. That is the legal safety net. In practice the worker has to track it, and the employer has to pay it, with the Department of Labor stepping in only after a complaint. For the broader floor this sits under, see the federal minimum wage explained.

Why is the tipped wage $2.13?

The tipped cash wage landed at $2.13 in 1991, when it equaled half of the $4.25 minimum. Congress froze the dollar figure in 1996. Every federal raise since then has left it untouched, so $2.13 is now 29 percent of the full minimum rather than half of it.

How much is $2.13 worth today?

Far less than it was. Using the BLS consumer price index, $2.13 in 1991 equals roughly $5 in today's dollars. Put differently, the cash a tipped worker receives per hour buys well under half of what it did when the rate was set.

Full-time at $2.13, a worker takes home about $4,430 a year in cash wages before taxes. The rest of their pay arrives, or does not, as tips.

How does the tip credit work in a real paycheck?

Take a server who works 30 hours in a week at a $2.13 cash wage. The cash wage totals $63.90. To reach the $7.25 floor for those hours, the pay must total $217.50, so tips have to cover $153.60. If tips come to $200, the worker clears the floor and the employer owes nothing more. If tips come to $100, the employer owes the missing $53.60.

That arithmetic assumes the worker reports tips accurately, the employer keeps correct records, and the shortfall actually gets paid. Wage theft claims in restaurants are a common enforcement topic for the Department of Labor, which is one reason the system leans so hard on the worker to notice a problem.

Do tips make up the difference?

Often, but not reliably. Tips swing with the season, the shift, the neighborhood, and the economy. A slow Tuesday can pay less than a Saturday night by a wide margin. A worker whose pay depends on strangers cannot plan a budget, and a missed rent payment does not care about the average.

Tipped workers also face a higher risk of poverty. Economic Policy Institute analyses have found that tipped workers face a poverty rate roughly twice that of other workers. That is not a claim about any one restaurant. It reflects an income model built on variable pay with a very low floor.

Tipped work is also unequal. Tipping rates and tipped income vary by race, gender, and the type of establishment, and women make up most of the tipped workforce. Our post on wage stagnation covers how this pay structure fits the larger pattern.

Which states do it differently?

Seven states require employers to pay tipped workers the full state minimum wage before tips: Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington. In those states, tips are on top of a regular wage rather than part of it.

Many other states set a tipped cash wage above $2.13 but still below the full minimum. A few leave it at the federal floor. The map matters because a server in Washington starts a shift earning about $17 an hour, while a server in a federal-default state may start at $2.13. See the numbers for the wider map in 2026 state minimum wage increases.

Does ending the tip credit hurt workers or restaurants?

The evidence is mixed, and both sides cite studies. Supporters of a single minimum wage say the states without a tip credit have healthy restaurant industries and that tipped workers there earn more and face less income volatility. Opponents say that higher menu prices or reduced hiring could hurt the very workers the change aims to help, and that tips already lift many servers well past the minimum.

Both views can be true in different places. What is harder to defend is the idea that a cash wage should stay frozen for three decades while prices rise. The history of every federal raise shows nothing else in the wage schedule stood still this long.

Is anyone trying to change it?

Federal proposals to phase out the tip credit and raise the tipped cash wage toward the full minimum have been introduced in Congress for years and have not passed. Several states and cities have debated or enacted their own versions, and voters in some places have weighed in directly through ballot measures. The fight tends to split the restaurant industry itself, with some owners backing a single wage and others warning of higher prices.

What does the tipped wage tell us?

It tells us that the rule has become a transfer. Customers pay what employers decline to, and the pay of a whole workforce depends on the generosity of strangers rather than on the law. Millions of workers wait on tables, pour coffee, and wash hair under a wage that has not moved since 1991, before smartphones and before the web was a household word.

The systemic cause is not rude customers or cheap owners. It is a federal law with no cost-of-living adjustment and a carve-out that has outlived its logic. Our living wage hub shows what a basic life costs, and the affordability crisis shows how far pay has fallen behind it. A floor that rises with prices would give every worker a number to plan around.