The Effects of Minimum Wages on Tipping: A State-Level Analysis

Analyses of state differences in minimum wages and tip percentages found that (1) states with higher regular minimum wages have lower average tip percentages in coffee shops and higher average tip percentages in restaurants (after controlling for tipped minimum wages and cost-of-living) and (2) states with higher tipped minimum wages have lower average tip percentages in restaurants and higher average tip percentages in coffee shops (after controlling for regular minimum wages and cost of living). Although the data are only correlational and do not prove causality, these findings support the idea that paying tipped workers higher wages decreases the tip percentages those workers receive. Discussion centers on the potential processes underlying such an effect, its implications for minimum wage policy and directions for future research.