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MINIMUM WAGES AND TIPPED SERVERS
Author(s) -
WESSELS WALTER JOHN
Publication year - 1997
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1997.tb01914.x
Subject(s) - monopsony , minimum wage , server , economics , wage , labour economics , efficiency wage , power (physics) , computer science , physics , quantum mechanics , world wide web
Tips allow restaurants to pay servers lower wages. As more servers are hired, each serves fewer meals and earns less in tips. As a result, restaurants must pay a higher wage. This gives them monopsony power over wages. Over some range, a higher minimum wage should increase employment. Empirically, we found the full “reverse C” monopsony pattern of employment for restaurants, with employment first going up and then down as the minimum wage is increased.