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As Hawaiʻi's minimum wage rises, some lawmakers want to scrap the tip credit

FILE - In this 2018 photo, a tip jar sits on the counter at Zak the Baker in Miami. (AP Photo/Lynne Sladky)
Caleb Jones
The interior of the ʻAlohilani Resort on Aug. 7, 2019. (AP Photo/Caleb Jones, File)

Oʻahu community members gathered at a town hall meeting on Wednesday to discuss their frustration with the tip credit — a wage system that many service workers have deemed as inequitable over the years.

Currently, restaurants and hotels are allowed to deduct $1 from the minimum wage of workers who receive tips.

Supporters say it helps restaurant owners reduce their costs. The Fair Labor Standards Act states that an employer who claims a tip credit must ensure that the employee receives enough tips from customers to meet the minimum wage.

A banner displayed at the town hall used to discuss the tip credit on March 8, 2023.
Zoe Dym
A banner displayed at the town hall used to discuss the tip credit on March 8, 2023.

That dollar is officially called a tip credit, but affected workers say it should be called a tip penalty.

"Currently that $1 tip credit, if you add it up it’s over $2,000 a year. That's $200 that you can use towards rent. That's $200 that you can use towards food. That's $200 that you can use towards child care," explained Sergio Alcubilla with the Hawaiʻi Worker Center.

By the time the minimum wage increases to $18 by 2028, the tip credit will increase to $1.50 — making the minimum wage for tipped workers $16.50 an hour.

This legislative session, Rep. Jeanne Kapela of Hawaiʻi Island wrote a bill that would have eliminated the tip credit. However, House Bill 1288 never received a hearing.

"When you look at the legislatures, and oftentimes I hate to say this, but their donation list — it’s not workers who are donating," Kapela told HPR.

"The people who are donating are the Chamber of Commerce, they are the Restaurant Association, they are the big business that comes out and talks about how workers don’t deserve a living wage," she said.

Many workers at the town hall meeting said tips are not a reliable source of income. According to the nonprofit One Fair Wage, 69% of workers reported their tips decreased by at least half when they returned to work after the COVID-19 shutdown.

Sen. Kurt Fevella of Oʻahu said workers need to send their complaints to the Department of Labor to make their voices heard.

"People are making excuses — I’m not gonna say who — making excuses saying, 'Cuz there's no complaints. Nobody complaining.' How you guys gon complain when you guys gotta work. When you come home you gotta cook, you gotta clean, you gotta take care of your family," Fevella said.

Zoe Dym was a news producer at Hawaiʻi Public Radio.
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