The Unintended Consequences of Policy Compromise: The Minimum Wage Increase Act of 1996 A Family Impact Analysis

Purpose: Raising the minimum wage has historically been an effective policy tool to reduce extreme inequality. Ever since the first minimum wage legislation was passed in the U.S, there have been subsequent legislative attempts to increase the minimum wage to be more aligned with inflation. Unfortunately, minimum wage increases do not apply to all wage earners. The passage of the Minimum Wage Increase Act of 1996 solidified a two-tiered wage policy in which tipped workers' wages were frozen at a subminimum wage level of $2.13 while other non-tipped wage workers wages were guaranteed a federal minimum wage that increased in subsequent decades. The purpose of this paper is to look at how the frozen, two-tiered wage policy embedded in the Minimum Wage Increase Act of 1996 continues to have an impact on families of tipped workers, with a specific emphasis on restaurant workers. Methods: This paper will use the Family Impact Analysis Framework to explore how the two-tiered wage for many restaurant workers exacerbates poverty and inequality. The impact of depressed wages on family well-being as well as the association between wages and physical and mental health outcomes for individuals and families will also be explored.