Indiana: It's High Time Legislators Raise Server Wages from $2.13

How much do you tip when you go out to eat? Did you know that your server is very likely making just over $2 per hour to take care of your table?

A Look at the History of the Federal Minimum Wage

The federal minimum wage in the United States has been frozen at $7.25 per hour since we saw the last increase in 2009, when it rose from $6.55 the previous year. In 2007 Americans saw the federal minimum wage jump for the first time since 1997 from $5.15 to $5.85 an hour, according to the Department of Labor.

No Federal Increase in 14 Years

While some states have a higher minimum wage for its residents, and some like Illinois will be seeing an increase in 2025, on a national level, we have not seen an increase in the federal minimum wage in 14 years.

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Inflation and a Livable Wage

According to the Bureau of Labor and Statistics, thanks to inflation over the last decade and a half, Americans would need to earn $10.29 per hour just to have the same buying power that we had at the time of the last increase in 2009. That is a 42% increase. Interestingly enough, a "livable wage" in Indiana is $11.14 per hour, according to Workstream.US.

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Federal Minimum Wage for Tipped Employees

Likewise, when we look at the history of the federal minimum wage for tipped employees - servers, bartenders, etc, the folks working in the service industry haven't seen a federal pay increase since 1991.

Frozen in Time for More Than Three Decades

You read that correctly. Servers have been frozen at $2.13 an hour for more than 30 years. When we look at the inflation calculator again, they would need to be earning at least $4.75 per hour as we head into 2024 to come out with the same purchasing power.

Making Up the Difference

Of course, the burden of making up the difference between the servers wage, and a livable wage falls on the consumer. Our tips are what keep the service industry folks with money in the bank. Fortunately, in Indiana (and Kentucky), we are pretty good about tipping well. At least for the most part. In fact, one study put both states at the top of the list for best tippers.

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Why Do We Even Still Tip?

Good tippers or not though, why has the federal minimum wage for tipped employees not seen an increase in more than three decades? And perhaps, moreover, why do we have this practice in the first place? In many European countries, tipping is calculated into the bill as a "service charge," according to Travel and Leisure, who also says that not leaving a tip is completely acceptable.

Some States Have Done Away with Tipped Wages

Several states raised their tipped minimum wage in 2023, and some have abolished tipped wages entirely.

Nevada and Oregon are two of the seven states that have eliminated their tipped minimum wage, while District of Columbia residents overwhelmingly passed a ballot measure in 2022 to phase out D.C.’s tipped minimum wage by 2027. As a result of the ballot measure, D.C.’s tipped minimum is scheduled to increase from $6 to $8 an hour in July. However, restaurant industry groups are attempting to seek tax relief and other loopholes to undermine the higher tipped minimum, arguing that rising costs and outstanding debt from the pandemic make it too difficult for restaurants to implement the tipped increase. But most tipped workers are low-wage earners, meaning they are some of the most vulnerable workers to inflation and cost of living increases. The harm of maintaining a low tipped minimum is severe. In states with the federal tipped minimum, the poverty rate for bartenders and other tipped occupations is 66% higher than in the seven states where tipped workers get the regular minimum wage. - Economic Policy Institute

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Failed Indiana House Bill

There was a bill introduced in 2023, House Bill 1192 that would have raised the state minumum wage for both standard pay, and tipped employees.

Amends the definition of "employee" for the purposes of the minimum wage statute. Increases the minimum wage paid to certain employees in Indiana as follows: (1) After June 30, 2024, from $7.25 an hour to $9.02 an hour. (2) After December 31, 2024, from $9.02 an hour to $10.07 an hour. (3) After December 31, 2025, from $10.07 an hour to $11.11 an hour. (4) After December 31, 2026, from $11.11 an hour to $12.10 an hour. Provides that after December 31, 2027, and each subsequent December 31, the hourly minimum wage increases at the same percentage as any increase in the Consumer Price Index for the preceding calendar year. Increases the cash wage paid to tipped employees as follows: (1) After June 30, 2024, from $2.13 an hour to $3.30 an hour. (2) After December 31, 2024, from $3.30 an hour to $4.71 an hour. (3) After December 31, 2025, from $4.71 an hour to $6.12 an hour. (4) After December 31, 2026, from $6.12 an hour to $7.54 an hour. Provides that after December 31, 2027, and continuing for each subsequent December 31, the cash wage required to be paid to employees is equal to 70% of the hourly minimum wage. - Indiana General Assembly

Unfortunately, in Indiana there has been no such increase as of now, and it doesn't look like we will be seeing one anytime soon. Where do you stand on wage increases in Indiana?