The federal minimum wage has been frozen at $7.25 an hour since 2009. It has essentially decreased since 1968. In fact, if we adjust for inflation, in 1968 it was equal to just over $12 in today’s dollars.
The Federal tipped minimum wage is $2.13 an hour if that amount plus the tips received equals at least the federal minimum wage.
The minimum wage in Michigan is $9.65 an hour as of January 1, 2020.
The tipped minimum wage in Michigan is $3.67 if that amount plus the tips received equals at least the Michigan minimum wage of $9.65 an hour.
Only seven states mandate that all workers, regardless of tips, must be paid the “full state minimum wage before tips,” according to the U.S. Department of Labor.
Minimum wage laws protect all employees, whether or not they receive tips. Employees are entitled to earn the full minimum wage per hour as set by federal law, or if higher, state law.
The US modern tipping culture is rooted in slavery. After the Civil War, employers hired newly freed slaves but lobbied to not pay them anything and have them live on tips.
After the Constitution was amended in the wake of the Civil War, slavery was ended as an institution but those who were freed from bondage were still limited in their choices. Many who did not end up sharecropping worked in menial positions, such as servants, waiters, barbers and railroad porters. These were pretty much the only occupations available to them. For restaurant workers and railroad porters, there was a catch: many employers would not actually pay these workers, under the condition that guests would offer a small tip instead.
Even though tips were originally meant to be a bonus they became a wage replacement.
Today, the tipping industry disproportionately affects women and people of color. In addition, customers tend to tip Black servers less than white servers.
Seven US states, however, have raised the tipped minimum wage to the full minimum wage with tips on top.
In these states, the poverty rate for tipped workers is significantly lower than in states where restaurants can pay tipped workers a base wage less than the full minimum wage.
Employees must at a minimum receive the equivalent of a minimum wage within a weekly pay period. An employer cannot justify paying less than the minimum wage by providing compensation at that rate over a month. (Marshall v. Sam Dell's Dodge Corp.)
Under federal law and in most states, employers may pay tipped employees less than the minimum wage, as long as employees earn enough in tips to make up the difference. This is called a "tip credit." The credit is the amount the employer doesn't have to pay, so the applicable minimum wage (federal or state) less the tip credit is the least the employer can pay tipped employees per hour. If an employee doesn’t make enough in tips during a given workweek to earn at least the applicable minimum wage for each hour worked, the employer has to pay the difference.
Michigan law allows employers to claim a tip credit, as long as they inform employees beforehand. In 2020, employers must pay tipped employees at least $3.67 an hour. This means that employers may take a tip credit of up to $5.98 an hour, as long as the employee makes at least $9.65 an hour with tips.
The minimum hourly rate of pay for a worker subject to tip credit provisions in Michigan is:
Effective Date
Minimum
Hourly Wage Rate
Tipped Employee Minimum Hourly Wage Rate
Provided Reported Tips
Per Hour Average At Least
January 1, 2018
$9.25
$3.52
$5.73
March 29, 2019
$9.45
$3.59
$5.86
January 1, 2020
$9.65
$3.67
$5.98
January 1, 2021
$9.65**
$3.67**
$5.98**
** the minimum wage did not increase because the unemployment rate was greater than 8.5% for 2020.
In other words, the employer must pay a minimum of $3.67 per hour to tipped employees as long as the employee makes a minimum of $5.98 on average per hour through tips to reach the minimum hourly wage of $9.65 per hour. If they don't earn $5.98 through tips the employer must pay the difference.
Source: https://www.michigan.gov/documents/cis/MW_InfoSheet_Tipped_ee_9_25_06_173903_7.pdf