When is a minimum not a minimum? On payday, for the millions of American workers who are paid less than the minimum wage — legally — because of who they are or what kind of work they do.
The minimum wage has gone up in 22 states, and according to the Economic Policy Institute, 7 million low-wage employees affected by the increases will earn an extra $8.2 billion over the course of this year as a result of the changes.
Last month, a ruling from a federal court in Massachusetts found that au pairs are also now entitled to the minimum wage. Parents are resisting the change, arguing that they won’t be able to manage the significantly increased cost of child care.
The debate is calling attention to how many workers are still scraping by with subminimum wages. They are mostly employees who rely on tips and are exempt from minimum-wage rules.
Under a New Deal-era federal labor law, employers are allowed to pay as little as $2.13 an hour — unchanged since 1991 — to about 2.6 million waiters, bartenders and others who receive tips, so long as the total of their tips and wages meets the federal minimum.
The poverty rate among subminimum-wage workers is nearly double that for nontipped workers, according to a data analysis done by the Economic Policy Institute. Not surprisingly, they are also far less likely to receive paid leave of any kind, health care coverage or retirement benefits as part of their employment. They and their families are also more likely to be supported by public assistance.
The average minimum-wage job now pays almost $12 an hour. That is believed to be the highest rate in U.S. history, even after adjusting for inflation. The federal minimum wage was last increased in 2009, to $7.25 from $6.55; since then, American workers have gone longer without a federal increase than at any time since the minimum wage was introduced in the 1930s. (The nation’s capital and 34 states require a higher tipped minimum wage than the federal floor of $2.13 an hour.)
The law includes a provision meant to protect employees: If a subminimum-wage employee earns enough in wages and tips to equal more than $7.25 an hour, the employee gets to keep it all, but if the amount of tips leaves the total earnings short of $7.25 an hour, the employer — in theory — must make up the difference.
For tipped workers, “the onus is on the employee to make sure the employer is making them whole at the end of the week,” said David Cooper, a senior economic analyst at the Economic Policy Institute.
More than 60% of tipped workers are employed in food service, but there are other categories of subminimum-wage workers as well, including some that cannot count on any tip income.
Au pairs are young people from other countries who come to the United States on cultural exchange visas to live with families and care for their children. They do not have a typical employee-employer relationship. Under a federal program, au pairs are paid a stipend of about $195 a week, as well as receiving room and board from the host family.
Here are more industries and job titles that the Fair Labor Standards Act exempts from the federal minimum wage.
Students. Full-time students under 20 who are employed by retail or service establishments, in agriculture, or by colleges can be paid a minimum wage of $4.25 an hour during the first 90 consecutive calendar days on the job.
Students in vocational education can be paid that wage as well. High school students who are at least 16 years old and work part time can be paid between 75% and 100% of the minimum wage as long as the student is enrolled.
Employees on small farms. This category includes agricultural employees who are immediate family members of their employer or who live locally but not on the farm. And it includes minors who are hand harvesters and are employed on the same farm as a parent.
Seasonal and recreational employees. Workers in jobs that last only part of the year — during the holiday season, say, or over the summer — at amusement parks, ice cream shops, summer camps and other attractions make up the bulk of this group, which tends to skew younger. But there’s also a chance that older workers can be placed into this category and be taken advantage of. “It might mean that others who are not teens getting paid less than minimum wage,” Cooper said.
Workers with disabilities. The government defines this category as those “whose earning or productive capacity is impaired by a physical or mental disability, including those related to age or injury.”
Small-business workers. One of the broadest exemptions, applying regardless of industry, occupation or worker, would seem to be the one for employees of very small local businesses — with gross annual revenue below $500,000 — who are not engaged in interstate commerce. But Cooper said that there are relatively few businesses that qualify.
Others. The federal statute also exempts some other types of workers: baby sitters employed on a casual basis, companions for the aged, newspaper carriers. And if there are any “switchboard operators” left, they are exempt as well.