Happy Juneteenth! Today marks the fourth year that the United States has celebrated Juneteenth as an official federal holiday, which commemorates the final enforcement of the Emancipation Proclamation on June 19, 1865 in Galveston, Texas at the end of the Civil War.
In addition to its historical significance, Juneteenth provides an opportunity for all Americans to reflect on the progress that we’ve made on the road to achieving racial justice but also how far we still have to go down that path. The days of slavery, Jim Crow, and “separate but equal” may be over, but Black Americans still face systemic discrimination in just about every facet of their lives—from the healthcare system, law enforcement, the courts, the education system, and more.
Here at Patriotic Millionaires, we like to use Juneteenth to focus specifically on one of the biggest areas of everyday life where Black Americans encounter undue hardship: the economy. According to the Federal Reserve Bank of St. Louis, in the third quarter of 2024, the average white household in America held about $1.4 million in wealth while the average Black household held roughly $311,000. Put another way, for every $100 in wealth the average white household has, the average Black household has just $22. As of 2023, the homeownership rate among Black families was also 30% lower than that of white families and their poverty rate was twice as high.
There are a number of reasons why America’s “racial wealth gap” is so massive. Redlining, blockbusting, excluding Black veterans from the post-WWII GI Bill, and Black people being swindled into predatory subprime mortgages that ultimately created the 2008 financial crisis are all frequently cited as major contributors. For this week’s Closer Look though, we’d like to spotlight one of the racial wealth gap’s sources that continues into the present: the subminimum tipped wage. Specifically, we’ll explain what the subminimum wage is, how it’s a vestige of slavery, and why we should do away with it.
What is the subminimum tipped wage?
Workers that rely on tips—like restaurant servers, bartenders, hairdressers, and valet drivers—are typically subject to a minimum wage that is lower than the standard minimum wage. The law stipulates that employers are required to pay tipped workers a base wage that, when combined with tips, meets or exceeds their state’s or city’s standard minimum wage.
While the standard federal minimum wage has been $7.25 an hour since 2009, the federal subminimum tipped wage has remained a measly $2.13 an hour since 1991. As of this writing, forty-three states have a subminimum tipped wage, and sixteen of them abide by the $2.13 federal subminimum wage. Meanwhile, seven states—Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington—have no separate, lower wage for tipped workers, who are paid at least their state’s minimum wage with the opportunity to make tips on top.
How is the subminimum wage a vestige of slavery?
Something that is rarely talked about is how tips and subminimum tipped wages have an ugly origin story in America. Tipping first started in Europe as a form of “noblesse oblige,” where aristocrats essentially gave bonuses to servants as a reward for exceptionally good service. After the Civil War, business owners who still wanted to exploit formerly enslaved Black people brought the idea over to America, but with a financial twist to it: they decided that tips would replace wages entirely for Black workers.
For nearly a century, Black workers in tipped industries were guaranteed exactly $0 in wages for their work. When the minimum wage was created with the 1938 Fair Labor Standards Act, it excluded protections for industries like hotels and restaurants whose workers were largely Black. It wasn’t until 1966 when the Fair Labor Standards Act was amended that tipped workers were finally guaranteed a wage. The catch? Tipped workers were only guaranteed a subminimum wage. At first, it was set at 50% of the full federal minimum, but today—at just $2.13—it is just 30%.
In short, slavery may be over in America, but tipped workers still suffer under its dark shadow with the subminimum tipped wage.
What’s wrong with having a subminimum tipped wage?
The tipped minimum wage might seem fine in theory, especially as employers are required to make up the difference if workers’ base pay plus tips doesn’t meet the minimum wage threshold. But the sad reality is that this doesn’t always happen, as tipped workers are frequently reported as the victims of wage theft. Customers’ tipping habits can also be unpredictable and often have little to do with the quality of service, leaving workers dependent on customers’ whims to make ends meet.
The life for most tipped workers in America is a hard one. Tipped workers are 2.3 times more likely to live in poverty than their non-tipped counterparts. The median wage for tipped workers in the US is roughly $15.81, which is much less than the $24.95 median wage for non-tipped employees. Tipped workers are also less likely to have access to benefits like health care, paid sick leave, and life insurance and are more likely to rely on public assistance programs. Nearly half (47%) of the tipped workforce is comprised of people of color, and over two-thirds are women, who report suffering sexual harassment at much higher rates than their non-tipped peers. Given its history, it also shouldn’t come as a surprise that the South has the highest population of tipped workers of any region in the US, with four out of every eleven tipped workers coming from the South.
Life is far better, however, for tipped workers in the seven states that do not have a subminimum wage. They enjoy higher take-home pay, are less likely to live in poverty, and experience less harassment on the job. Also, opponents of eliminating subminimum tipped wages—the loudest of which is the National Restaurant Association—claim that doing so will kill jobs, but experience and facts tell a different story. Compared to the forty-three states with subminimum tipped wages, these seven states have the same or higher restaurant sales, job growth rates, small business growth rates, and wage growth rates.
There is a push going on right now in Washington, DC to repeal Initiative 82, a 2022 ballot measure that gradually phases out the city’s tipped minimum wage which passed with overwhelming support. DC Mayor Muriel Bowser called for Initiative 82 to be repealed in her 2026 budget over claims that the restaurant industry is struggling with higher operating costs and heightened unemployment among federal workers. Heeding her message, the DC City Council followed suit earlier this month by pausing the next incremental wage increase for tipped workers that was slated to go into effect on July 1. Not only is this a blatant, undemocratic disregard of the will of the people who voted for this Initiative in 2022, but it also goes against all the data that we have of the effects of the measure. Between 2022 and 2024, employment at full-service restaurants in DC rose 8.7%. Over the last ten years, restaurant employment levels were highest in the fourth quarter of 2024 and the first quarter of 2025. These numbers pretty much speak for themselves in how successful Initiative 82 has been and why DC should move forward with the elimination of the city’s subminimum wage!
We’ve spoken over and over again about the need to raise the federal minimum wage to a living wage—and we won’t stop any time soon. But in the meantime, we should all be able to agree that all workers in all industries, tipped and non-tipped, should benefit from the same wage floor, and that we should leave the subminimum tipped wage in the past where it belongs.
Conclusion
Economic justice and racial justice go hand in hand. When we eliminate subminimum tipped wages, we take a step forward in the fights for both economic justice and racial justice. The same can be said for just about every aspect of the economy, from the tax code to labor laws to antitrust laws and more.
It is important to remember, especially in this current era of division, that workers of all races have so much more in common with each other than they do with rich people like us. In the days before the Emancipation Proclamation, America’s biggest economic problem was that an enormous amount of wealth and power was concentrated in the hands of a few white men. Unfortunately, not much has changed today. Oligarchy was a problem on the first Juneteenth in 1865 and it’s still a problem on today’s 160th celebration of Juneteenth.
We’d like to close by sharing a quote from Dr. Martin Luther King Jr.: “…this is America’s opportunity to help bridge the gulf between the haves and the have-nots. The question is whether America will do it. There is nothing new about poverty. What is new is that we now have the techniques and the resources to get rid of poverty. The real question is whether we have the will.” In the end, the tools for closing the racial wealth gap and advancing the joint causes of economic and racial justice are out there. On this Juneteenth, we should heed Dr. King’s words and find the political will to use them.