Last week I wrote a piece rebutting a study put out by a women’s advocacy group that found that food service jobs – waiters and waitresses – suffer from a very low server minimum wage. Typically, this wage is $2.13 an hour for tipped employees. But the group drew conclusions about server income without looking at the tendency for servers to grossly under-report their income from tips. The group, The Restaurant Cities Citizens United – backed by NOW and other feminist organizations – wrote:
Servers, 71 percent female and the largest group of all tipped workers, represent the seventh-lowest paid occupation of the country’s lowest-paid jobs, with a median hourly wage of $8.81, well below the poverty wage. Not surprisingly, servers experience almost three times the poverty rate of the workforce as a whole.
I decided to look at my own tips for this past week, and I crunched a few numbers. I looked at the figures which the computer at work tracks. I compared what the computer reported as my actual net tips versus what I actually earned. Of course, at the end of the week, I adjusted my earned tips to reflect my true earnings. But this is not the norm in the industry. Most servers adjust their reported tips to minimize their tax burden. My income figures – assuming the computer’s calculations versus my true earnings:
- My actual earned tips – the amount I’ve received in tips minus the amount I’ve tipped out to support staff i.e. the amount I’ve “walked with” – were $590.
- My reported tips – the computer’s calculation of received tips minus tip out – were $400. This is a $190 gap.
- Extrapolated, $190 per week translates into $9,880 per year. If I were to under-report at this rate, I’d avoid paying an extra $612 in payroll taxes (discounting legislation temporarily ending FICA collections). Also, since FICA taxes are paid jointly by employers and employees (6.2% apiece) my employer is saving just as much which could explain part of the resistance to changing towards more rigorous tip reporting standards.
- As far as federal taxes go under-reporting tips by this amount would diminish my tax bill by about $1500. On my state taxes, I would save $593.
- My total annual tax savings if I’d under-reported tips- and absent any extra effort on my part to minimize reported income: $2,700.
- And the final stat, I worked 28.5 hours to earn that $590 which translates into an hourly wage of about $22.83 if I include my $2.13 minimum. According to my reported tips, I earned only $16.17 with the tipped minimum. This is a $6.66 wage gap. Depending on your denominator, my income is either about 41% higher than reported, or my income was under-reported by about 29%.
When we’re discussing policy or poverty among a growing cohort of American workers it is important to remember this inherent aspect of the restaurant industry. If a restaurant worker reports more income than they actually earned, this would be a gross exception to the industry rule.
To provide a picture of exactly how much income is under-reported, the Bureau of Labor Statistics pegs the 90th percentile of waiter/waitress wages at $14.41 per hour. That’s even less than my under-reported tip amount, and I don’t work anywhere near fine-dining.
I don’t want to glorify this work, but there is a reason that people are moving towards the food service industry, just as there’s a reason that I haven’t had much of a fire under my ass to move out of the industry either. The money is decent, it is liquid, and the work stays inside the building. The schedules are also flexible which allows people like me to pursue outside interests like blogging. So when you see a group or an individual complain about low server wages and poverty, take it with a grain of salt – that is, if the server remembered to refill it.
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you shysters….
I’ll get all my food takeout and cook for myself so I don’t contribute to the underground economy….
If these people assumed that cash income was honestly reported, they’re not mistaken, they’re lying. Or else they’ve achieved a degree of desperate, drooling, shit-wallowing, inhuman functional stupidity that a possum would be ashamed of — or possibly even Maxine Waters.
Humh. I wonder if strippers underreport their cash earnings as well.
Good analysis. I ran the numbers for shits and grins with an Illinois return and it ended up being $2568 (44,000 vs 34,120 wages) in savings. Just to confirm your analysis if anyone says “But that can’t be right”
Delete this post. The IRS has agents with enough time on their hands to pay women to talk people up at a bar and then arrest them for admitting they lied on their taxes.
red:
i’m not worried about it. i’ve never lied on my taxes. i report whatever is printed on my W-2, and what is printed on my W-2 is what is reported by the computer system.
Read this:
http://www.nytimes.com/2011/03/26/business/26nocera.html?_r=1&pagewanted=all
It might change your mind.
red,
that’s a pretty heinous incident. sickening actually. this week was the first in which i’d actually crunched the numbers on my own tips. of course, i’ll be sure to track and fully report all of my future income.
If you’re serious about increasing your reported tips, i just lost respect for you. I tried to “correctly report” my income a few yrs ago, and they thanked me by more than doubling the “extra” i reported, which was not even “extra”. Every good deed goes punished.
Stop doing that, please.
lol…
I know this is one person… but i told ya servers pull some good cash. My est. Was over 20 an hour…
Thanx for putting your self out there. Would yousay you earnings are above or below average for your area/establishment?
Nick, come on. I’ll leave it at that.
It’s the internet; you can never really tell, so, i had to say it.
One other thing: the govt pays its employees a different “cost of living adjustment” for the cities they live in; since it costs more to live in NYC than Mobile Alabama, they need to offer higher wages if they want even barely-competent employees in some areas. Do you think it would make sense for the IRS to calculate a “Tip COLA” map, to account for the lower expectations of tips in certain demographic areas (cough — large black populations — cough)?
hahahaha,
so for the name above-I suppose the game is to switch the d with the n….
good one dick…
us halfbreeds aren’t nearly as stupid as you wannabe nazi’s think….
Half-breed?
http://democratic-republicans.us/images/black-nazis-veronica-clark.jpg
You shoulda went full black, son. Nazis’ll never take you now.
aw shucks the feminists and nazi’s won’t take me and most the manosphere thinks I’m an idiot….
maybe advocatus diaboli will be my friend….
maybe he’ll even pay me, but I won’t touch lil’ diablo…
My SO has been debating taking a job slinging tables in a friend’s restaurant because the wgaes would be largely untaxed and likely higher than what she’s making now, working in X media.
Sad but true.
To provide a picture of exactly how much income is under-reported, the Bureau of Labor Statistics pegs the 90th percentile of waiter/waitress wages at $14.41 per hour. That’s even less than my under-reported tip amount, and I don’t work anywhere near fine-dining.
Differences between where you work and fine-dining:
Number of tables (or tops) handled at the same time.
Time spent dining.
Average price per person.
And possibly, the number of people to tip out.
While average price per person for fine dining sky rockets from your usual, the fewer tables of fewer people turned less often results in much less earnings than some might think the higher check averages would result in.
You might be handling 25-30 customers with a turn time of 45 minutes.
Fine-dining would be more like 12-16 customers every 90-120 minutes, and you aren’t getting the tips for the 30 minutes of drinking.