NEW YORK (Reuters) - U.S. service sector employees who receive tips have been excluded from the latest hike in the federal minimum wage that kicked in on Friday, leaving the public to cover the cost of their healthcare, according to economists and advocates.
The federal minimum wage on Friday rose to $7.25 from $6.55. But only seven states guarantee tipped workers the minimum wage, according to a report by the National Employment Law Project, a New York-based advocacy group for low-income workers.
The minimum wage for so-called “tipped” workers has been frozen at $2.13 an hour since 1991, the report found.
Waitresses and waiters, who comprise the majority of tip-receiving workers, have nearly three times the poverty rate of the nation’s workforce, it said.
Wait staff are twice as likely to go without health insurance, partly because few employers help them pay for a health plan.
James Parrott, the chief economist of the New York-based Fiscal Policy Institute, said the public often pays for some of these low-income employees’ healthcare.
“Low-wage workers without health insurance can cost taxpayers $3,000-$6,000 a year if covered by Medicaid, or, if they receive uncompensated care, they cost employers or individuals who have private health insurance an average of $2,500 per uninsured person receiving compensated care,” he said by e-mail.
The Fiscal Policy Institute, a nonpartisan think tank, in a report estimated that at the new federal rate, a full-time worker would earn $15,080 a year.
“Research has shown that workers benefiting from minimum wage increases in New York are disproportionately women, and minimum wage earners on average contribute most of their family’s earnings,” the institute’s Michele Mattingly said in the report.
“Contrary to stereotype, large numbers of affected workers -- often the majority -- are adults aged 20 and older,” she said
Covering healthcare could prove difficult for many recession-stricken U.S. states that are slicing spending on Medicaid, the federal-state health plan for the poor, disabled and elderly, which consumes about 22 percent of an average state’s budget.
With U.S. Senate leaders delaying action on President Barack Obama’s health plan until autumn, 18 states have already cut spending on public health programs.
Reporting by Joan Gralla, and Lambert in Washington; editing by Mohammad Zargham